If you’re struggling to pay your student loans, it’s tempting to pause them altogether. Deferring student loan payments is one way to stop the bills, but it might not be your best option.
Even if you meet the eligibility requirements of student loan deferment, you could be better off with another approach. Otherwise, the debt you have today could grow into an even bigger burden tomorrow.
If your reasons match any of the three below, reconsider whether deferring student loans is the right choice.
1. You don’t feel like paying your student loans yet
Your first student loan bill after graduation can be a rude awakening. You’ve only just left school, and now you’re expected to pay off your debt every single month. As a new grad, you can probably think of lots of other, more fun ways to use your money.
But even if you qualify to defer student loans, you shouldn’t necessarily choose this option. For one thing, deferring student loans might put an even bigger financial burden on Future You.
Unless you have subsidized federal loans, interest will continue to accrue on your federal student debt. Once deferment ends, you could end up owing more than when you started. You can calculate how deferment affects your monthly payments using our deferment calculator.
Karla Garcia, a student loan borrower and owner of Sweets by Karla, learned this lesson the hard way. “I deferred my student loans for about four years and it was a big mistake,” she said. “My loans accrued a lot [of] high interest. They went from about $35,000 to $55,000.”
Because she chose to defer student loans, Garcia’s debt grew by a whopping 57 percent.
Deferment might be the right choice if you’re really struggling to make ends meet. But if you can make payments — even if it means sacrifice in other areas — you’ll be in better financial shape in the long run.
Being financially responsible isn’t always fun, but it’s the best decision you can make after you graduate.
2. You haven’t explored all your repayment options
Deferring student loans should be seen as a last resort in the case of extreme economic hardship or other qualifying events. Paying back some of your debt, even if you can only do so a little at a time, is usually preferable to pausing payments altogether.
If your income is low and you have federal student loans, explore your options for income-driven repayment (IDR). Repayment plans like Income-Based Repayment extend your loan terms to 20 or 25 years. Plus, they cap your monthly bills at 10 to 20 percent of your discretionary income.
Note that these plans only apply to federal student loans. If you have private student loans, speak with your loan servicer to see if you’re eligible for a more flexible repayment plan. Either way, learn about all your options before committing to deferment.
James Pollard, the founder of The Advisor Coach, wishes he started paying his student loans sooner:
“When I was in college, I deferred my student loans,” he said. “Looking back, I wouldn’t have waited … It was a mistake to defer the student loans because they’re still there — I wish I would’ve taken whatever I had and started to chip away at them.”
Instead of deferring student loans, consider whether you can repay your debt a little at a time under a new repayment plan.
3. You’re letting frustration get the better of you
For many borrowers, the thought of student loans is often accompanied by complicated emotions. Some borrowers feel they were tricked into taking on a lot of debt as teenagers. Others feel resentment after dealing with sketchy loan servicers that gave them harmful misinformation.
But even if you qualify to defer student loans, your decision shouldn’t come from frustration. In fact, pausing your student loans will probably hurt you much more than your lender. Federal student loans never go away, plus interest will just make your debt grow bigger.
“I put my student loans in deferment three times,” said Yolanda Rambert-Marshall, who owed $25,000 in student loans. “If I had to do it all over again, I would [have] asked for a reduction in the price I was paying each month instead of putting it in deferment. You come out better in the long run by continuing to pay your loan.”
Even if you’ve dealt with unfair practices, your best option is to pay off your student loans as fast as possible. Those student loans won’t go away until your balance hits zero.
Good reasons to defer student loans
Though continuing to make payments is often a wise decision, deferring student loans can be a smart financial choice in some situations. If any of these scenarios apply to you, it might make sense to defer your student loans.
- You’re hovering near default. If you’re about to go into default, deferring student loans could give you the relief you need. Once you’ve paused your payments, you can figure out how to get back on your feet.
- Your financial hardship is short term. Deferring student loans can help you through a rough patch, such as a medical issue that leaves you unable to work for a few months. As long as you don’t defer student loans for a long time, you shouldn’t rack up too much interest.
- You’ve been called into active duty military service. Not only can pausing your student loans help you during your service, but you might have opportunities for student loan repayment assistance in the future.
Deferring student loans can help you through an emergency or break from work. If you need more long-term relief, though, reducing your student loan payments through an income-driven plan could be the better approach.
Make the best decision for your finances
If your student loans are overwhelming, it’s tempting to deal with them at a later date. But you can’t predict the future or know what other expenses you’ll have down the line.
If you truly can’t make payments, deferring student loans could be a useful option. Before pausing your payments, though, make sure to learn about your options for student loan repayment.
With this knowledge, you can choose the best repayment plan for your wallet. Plus, you’ll stay on track to getting out of student loan debt as fast as possible.
Interested in refinancing student loans?Here are the top 6 lenders of 2019!
|Lender||Variable APR||Eligible Degrees|
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1 Important Disclosures for SoFi.
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 3.89% APR (with Auto Pay) to 7.89% APR (with Auto Pay). Variable rate loan rates range from 2.54% APR (with Auto Pay) to 7.27% 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 March 18, 2019, 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 0318/2019. 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@example.com, or call 888-601-2801 for more information on ourstudent loan refinance product.
© 2018 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 Laurel Road.
Laurel Road Disclosures
However, if the borrower chooses to make monthly payments automatically by electronic funds transfer (EFT) from a bank account, the fixed rate will decrease by 0.25%, and will increase back up to the regular fixed interest rate described in the preceding paragraph if the borrower stops making (or we stop accepting) monthly payments automatically by EFT from the designated borrower’s bank account.
However, if the borrower chooses to make monthly payments automatically by electronic funds transfer (EFT) from a bank account, the variable rate will decrease by 0.25%, and will increase back up to the regular variable interest rate described in the preceding paragraph if the borrower stops making (or we stop accepting) monthly payments automatically by EFT from the designated borrower’s bank account.
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.
5 Important Disclosures for CommonBond.
Offered terms are subject to change. Loans are offered by CommonBond Lending, LLC (NMLS # 1175900). 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 2.5% effective February 10, 2019.
6 Important Disclosures for Citizens Bank.
Citizens Bank Disclosures
|2.54% – 7.12%3||Undergrad & Graduate|
|2.54% – 7.27%1||Undergrad & Graduate|
|2.67% – 8.96%4||Undergrad & Graduate|
|3.23% – 6.65%2||Undergrad & Graduate|
|2.69% – 7.43%5||Undergrad & Graduate|
|2.98% – 9.72%6||Undergrad & Graduate|