Should I Put My Student Loans on Deferment?

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Student loan deferment allows you to temporarily stop making payments on your student loans. You may still be required to continue making interest payments, however, even if your loan is on deferment, or you may be able to choose whether or not you want to pay the interest each month. That interest will still be applied to your loan's principal balance if you elect not to pay it.

Student loan deferment extends the period of time that it will take you to pay off the loan. This results in paying more interest on the loans, so it's important to be sure that you really need to put the loans on deferment.

On Aug. 24, 2022, President Joe Biden announced via Twitter the cancellation of $10,000 of federal student loan debt for eligible borrowers, and $20,000 for federal Pell Grant recipients. Biden also extended the pause on payments and interest on federal student loans to Dec. 31, 2022.

When Should You Put Your Loans on Deferment?

The CARES Act (passed in March 2020) includes relief to borrowers with federally-owned student loans. The forbearance period is set to expire Dec. 31, 2022.

You may want to put your loans on deferment if your loans don't qualify for federal student loan relief and you've lost your job. You might also want to put your loans into deferment if you're just having a hard time meeting your basic needs.

Some people defer their loans to focus on getting rid of their other debt as quickly as possible, but this is only a good idea if you can't meet your other financial obligations while you're also paying on your student loans.

Look into whether you qualify for income-driven student loan payments if you're facing the possibility of not being able to pay your student loans for the long term. This type of payment plan adjusts your payment to accommodate your income. It will usually lower your payment. But it will take you longer to pay off your loan if you select this option, and you'll also accrue more interest. This will increase the amount you owe overall.

On Aug. 24, 2022, President Joe Biden’s administration proposed a new plan for federal student loan repayment for undergraduate loans. The plan would cap monthly payments at 5% of your monthly income. After 10 years, whatever remaining balance you have would be eliminated if the original loan balance was $12,000 or less.

You may be eligible for student loan forgiveness depending on your profession. The terms can vary, but this generally means that the balances will be forgiven if you pay your student loans for a certain amount of time and you don't miss a payment. This option is usually only available for those who work in public services, however, such as teachers.

Student loan debt that's forgiven or discharged between 2021 and 2025 is tax free due to the American Rescue Plan of 2021.

Create a Game Plan

Talk to your student loan servicer and learn about the terms of deferment before you commit to going on deferment.

It can also be wise to create a written budget that lists all your bills, monthly spending, debt, and income. Cut back on other areas of your budget if you're considering a deferment, if possible. Deferment is a temporary solution for a limited period of time. You'll find yourself in the exact same position down the road if you put your student loans on deferment and don't change your spending habits or earning power.

It's also smart to address your student loan debt. A debt payment plan can help you focus on paying off your student loans so you can get out of debt more quickly.

You can get out of debt and begin to build wealth if you take the time now to work to improve your situation,

Applying for Deferment

Contact your student loan servicer to begin the process of putting your loans into deferment. You may need to prove that you qualify for the economic hardship that allows you to do so. You may be asked for documentation and given a time limit of how long you can remain in deferment. You'll also have to fill out an application.

You may want to consolidate your loans and select a longer term to lower your monthly payments if you don't qualify for a deferment program. 

Handling Private Student Loans

You may not have the option to defer private student loans. You'll have to speak to your lender to find out. Private loans don't generally follow the same guidelines as federally managed loans.

You may have to continue making payments no matter what your circumstances are if you have private student loans. This is one reason you should prioritize paying off your private student loans first before you tackle your subsidized student loans.

It's important to carefully follow the guidelines set forth by your lender regardless of the type of student loans you have. Continue to make payments on your debt until any sort of payment change or deferment has been approved. You'll avoid late fees or damage to your credit score this way.

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