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Note that the situation for student loans has changed due to the impact of the coronavirus outbreak and relief efforts from the government, student loan lenders and others. This includes automatic interest-free deferment on all federally-held student loans. Check out our Student Loan Hero Coronavirus Information Center for additional news and details.
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If you’re heading back to school to earn an advanced degree, you might not have the money to keep up with student loan payments. Fortunately, you can qualify for student loan deferment if you’re attending graduate school at least halftime, are enrolled in a fellowship program or meet other criteria.
That said, deferring your student loans while in graduate school isn’t always your best option. Read on to learn how to defer student loans for grad school, as well as some alternative ways to manage your student debt.
- The basics of deferring student loans while in grad school
- Benefits of deferring student loans in grad school
- Drawbacks of deferring student loans in grad school
- Deferring federal student loans
- Deferring private student loans
- Other ways to reduce payments on your student loans
- Should you defer student loans while you’re in grad school? Some final thoughts
When you put your student loans into deferment, you postpone making payments for a certain period of time. Normally, if you walked away from your student loan bills, your loans would go into default. But if you defer loans, you can stop paying without penalty.
The Federal Student Aid (FSA) office offers deferment on federal student loans, such as federal direct loans and PLUS loans. You can request deferment through your loan servicer. You’re eligible if you’re a graduate or professional student, or if you’re taking part in an approved graduate fellowship program.
Besides going back to school, there are other ways to qualify for student loan deferment. But one constant requirement, at least for federal loans, is that you have direct loans, PLUS loans, Federal Family Education Loan (FFEL) loans or Perkins loans.
As for private student loans, your options will vary from lender to lender. Some private lenders do offer deferment, but not all of them do. If you have private debt, speak with your lender or servicer about what possibilities are open to you.
Figuring out how to defer your student loans for grad school can be a big relief when you’re in grad school and aren’t making much money. Since you won’t have to worry about student loan payments, you’ll have more room in your budget for other living and school expenses.
Likewise, you won’t have to be concerned about defaulting on your student loans. Default comes with a host of bad consequences, including damage to your credit score and possibly wage garnishment. But by pausing payments through deferment, you won’t be at risk of defaulting through nonpayment.
Deferment is especially useful if you have subsidized direct loans, which are given to students with financial need. Interest does not accrue on subsidized loans when they’re in deferment, so your debt balance won’t grow while you’re in school.
Although having your student loans deferred while in grad school can offer financial relief, it also has a potential downside: If you defer unsubsidized student loans, interest will keep accruing on your balance.
As a result, your debt will grow, and when repayment resumes, you’ll owe more than you did when you started.
What’s more, taking your student loans out of deferment is considered a capitalization event. In a capitalization event, any interest that has accrued is added on to your principal balance. Then you start paying back this bigger balance at your same rate. In effect, you end up paying interest on your unpaid interest.
So while it’s tempting to forget about your student loans while in grad school, you could be facing a larger debt than you expected after you graduate.
If you decide it’s right for you, you can ask for deferment from your student loan servicer. There are different types of deferment, so make sure you’re requesting the one for “in-school borrowers” or a “graduate fellowship.”
You’ll provide basic personal information, such as your name, address and Social Security number. You’ll also need to indicate that you understand how deferment works, so make sure to read over the fine print and get answers to any questions you have.
And don’t stop making payments on your student loans until you get the green light from your loan servicer. You wouldn’t want to assume you’re in deferment before the paperwork has gone through, or your loans could end up in delinquency or worse, default.
Most of the information above applies to federal student loans, such as direct loans, PLUS loans or FFEL loans. But if you have private student loans, your options will be different.
Private lenders set their own rules for repayment, and only some offer deferment or forbearance when you return to school. Sallie Mae, for instance, offers deferment for up to 48 months when you return to school or start an internship, clerkship or fellowship.
Note that if you defer private student loans, interest will likely continue to accrue during this period of paused payments.
Instead of pausing payments on your federal student loans through deferment, you might instead reduce payments with an income-driven repayment, graduated repayment or extended repayment plan.
All of these plans adjust your monthly payment, so you have the opportunity to pay significantly less than what you would on the standard 10-year plan. If you’re working a part-time job during grad school, you might be able to swing these lower payments.
Alternatively, you could defer your student loans but continue to make interest-only payments. That way, your unsubsidized or PLUS loans won’t accumulate a ton of interest during your student years.
Whatever payments you can make while in grad school could mean a more manageable balance after you graduate.
If you’re wondering, “Can I defer student loans while in grad school?” the answer is most likely yes, as long as you enroll in a recognized program or fellowship. But perhaps an even better question would be, “Should I defer student loans while in grad school?” — to which the answer is: it depends.
If postponing payments is the only way you’ll avoid default, then deferment likely makes a lot of sense for your situation. But if you can make small payments each month, you might protect yourself from even more debt in the future by continuing repayment.
Before making any changes to your student loans, use our student loan repayment calculator to estimate your monthly payments and interest.
Student Loan Payment Calculator
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|Lender||Variable APR||Eligible Degrees|
|1.89% – 5.99%1||Undergrad & Graduate|
|1.99% – 5.64%2||Undergrad & Graduate|
|1.99% – 6.84%3||Undergrad & Graduate|
|1.91% – 5.25%4||Undergrad & Graduate|
|2.25% – 6.53%5||Undergrad & Graduate|
|2.17% – 4.47%6||Undergrad & Graduate|
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1 Important Disclosures for Splash Financial.
Splash Financial Disclosures
Terms and Conditions apply. Splash reserves the right to modify or discontinue products and benefits at any time without notice. Rates and terms are also subject to change at any time without notice. Offers are subject to credit approval. To qualify, a borrower must be a U.S. citizen or permanent resident in an eligible state and meet applicable underwriting requirements. Not all borrowers receive the lowest rate. Lowest rates are reserved for the highest qualified borrowers. If approved, your actual rate will be within a range of rates and will depend on a variety of factors, including term of loan, a responsible financial history, income and other factors. Refinancing or consolidating private and federal student loans may not be the right decision for everyone. Federal loans carry special benefits not available for loans made through Splash Financial, for example, public service loan forgiveness and economic hardship programs, fee waivers and rebates on the principal, which may not be accessible to you after you refinance. The rates displayed may include a 0.25% autopay discount.
The information you provide to us is an inquiry to determine whether we or our lenders can make a loan offer that meets your needs. If we or any of our lending partners has an available loan offer for you, you will be invited to submit a loan application to the lender for its review. We do not guarantee that you will receive any loan offers or that your loan application will be approved. Offers are subject to credit approval and are available only to U.S. citizens or permanent residents who meet applicable underwriting requirements. Not all borrowers will receive the lowest rates, which are available to the most qualified borrowers. Participating lenders, rates and terms are subject to change at any time without notice.
To check the rates and terms you qualify for, Splash Financial conducts a soft credit pull that will not affect your credit score. However, if you choose a product and continue your application, the lender will request your full credit report from one or more consumer reporting agencies, which is considered a hard credit pull and may affect your credit.
Splash Financial and our lending partners reserve the right to modify or discontinue products and benefits at any time without notice. To qualify, a borrower must be a U.S. citizen and meet our lending partner’s underwriting requirements. Lowest rates are reserved for the highest qualified borrowers. This information is current as of Feburary 1, 2021.
2 Important Disclosures for Earnest.
To qualify, you must be a U.S. citizen or possess a 10-year (non-conditional) Permanent Resident Card, reside in a state Earnest lends in, and satisfy our minimum eligibility criteria. You may find more information on loan eligibility here: https://www.earnest.com/eligibility. Not all applicants will be approved for a loan, and not all applicants will qualify for the lowest rate. Approval and interest rate depend on the review of a complete application.
Earnest fixed rate loan rates range from 2.98% APR (with Auto Pay) to 5.49% APR (with Auto Pay). Variable rate loan rates range from 1.99% APR (with Auto Pay) to 5.34% APR (with Auto Pay). For variable rate loans, although the interest rate will vary after you are approved, the interest rate will never exceed 8.95% for loan terms 10 years or less. For loan terms of 10 years to 15 years, the interest rate will never exceed 9.95%. For loan terms over 15 years, the interest rate will never exceed 11.95% (the maximum rates for these loans). Earnest variable interest rate loans are based on a publicly available index, the one month London Interbank Offered Rate (LIBOR). Your rate will be calculated each month by adding a margin between 1.82% and 5.50% to the one month LIBOR. The rate will not increase more than once per month. Earnest rate ranges are current as of October 26, 2020, and are subject to change based on market conditions and borrower eligibility.
Auto Pay discount: If you make monthly principal and interest payments by an automatic, monthly deduction from a savings or checking account, your rate will be reduced by one quarter of one percent (0.25%) for so long as you continue to make automatic, electronic monthly payments. This benefit is suspended during periods of deferment and forbearance.
The information provided on this page is updated as of 10/26/2020. Earnest reserves the right to change, pause, or terminate product offerings at any time without notice. Earnest loans are originated by Earnest Operations LLC. California Finance Lender License 6054788. NMLS # 1204917. Earnest Operations LLC is located at 302 2nd Street, Suite 401N, San Francisco, CA 94107. Terms and Conditions apply. Visit https://www.earnest.com/terms-of-service, email us at [email protected], or call 888-601-2801 for more information on our student loan refinance product.
© 2020 Earnest LLC. All rights reserved. Earnest LLC and its subsidiaries, including Earnest Operations LLC, are not sponsored by or agencies of the United States of America.
3 Important Disclosures for CommonBond.
Offered terms are subject to change and state law restriction. Loans are offered by CommonBond Lending, LLC (NMLS # 1175900), NMLS Consumer Access. If you are approved for a loan, the interest rate offered will depend on your credit profile, your application, the loan term selected and will be within the ranges of rates shown. All Annual Percentage Rates (APRs) displayed assume borrowers enroll in auto pay and account for the 0.25% reduction in interest rate. All variable rates are based on a 1-month LIBOR assumption of 0.15% effective Jan 1, 2021 and may increase after consummation.
4 Important Disclosures for LendKey.
Refinancing via LendKey.com is only available for applicants with qualified private education loans from an eligible institution. Loans that were used for exam preparation classes, including, but not limited to, loans for LSAT, MCAT, GMAT, and GRE preparation, are not eligible for refinancing with a lender via LendKey.com. If you currently have any of these exam preparation loans, you should not include them in an application to refinance your student loans on this website. Applicants must be either U.S. citizens or Permanent Residents in an eligible state to qualify for a loan. Certain membership requirements (including the opening of a share account and any applicable association fees in connection with membership) may apply in the event that an applicant wishes to accept a loan offer from a credit union lender. Lenders participating on LendKey.com reserve the right to modify or discontinue the products, terms, and benefits offered on this website at any time without notice. LendKey Technologies, Inc. is not affiliated with, nor does it endorse, any educational institution.
Subject to floor rate and may require the automatic payments be made from a checking or savings account with the lender. The rate reduction will be removed and the rate will be increased by 0.25% upon any cancellation or failed collection attempt of the automatic payment and will be suspended during any period of deferment or forbearance. As a result, during the forbearance or suspension period, and/or if the automatic payment is canceled, any increase will take the form of higher payments. The lowest advertised variable APR is only available for loan terms of 5 years and is reserved for applicants with FICO scores of at least 810.
As of 02/17/2021 student loan refinancing rates range from 1.91% APR – 5.25% Variable APR with AutoPay and 2.95% APR – 7.63% Fixed APR with AutoPay.
5 Important Disclosures for SoFi.
6 Important Disclosures for PenFed.
Annual Percentage Rate (APR) is the cost of credit calculating the interest rate, loan amount, repayment term and the timing of payments. Fixed Rates range from 2.99%-5.15% APR and Variable Rates range from 2.17%-4.47% APR. Both Fixed and Variable Rates will vary based on application terms, level of degree and presence of a co-signer. These rates are subject to additional terms and conditions and rates are subject to change at any time without notice. For Variable Rate student loans, the rate will never exceed 9.00% for 5 year and 8 year loans and 10.00% for 12 and 15 years loans (the maximum allowable for this loan). Minimum variable rate will be 2.00%. These rates are subject to additional terms and conditions, and rates are subject to change at any time without notice. Such changes will only apply to applications taken after the effective date of change.