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 an interest-free automatic pause to repayment for all federally held student loans. Check out our Student Loan Hero Coronavirus Information Center for additional news and details.
* * *
There are many situations in which you may end up short of the money you need to pay your student loan bill. Because of this, public (and sometimes private) student loan providers offer the option of deferring student loans — basically, pausing repayment for a set period of time.
Deferment can be a financial life-saver for some, but a costly mistake for others. In order to learn about deferment and whether it’s right for your particular situation, let’s look at the following topics:
- What deferring student loans does
- Pros and cons of deferring student loans
- When to defer your student loan
- Alternatives to student loan deferment
- Making the deferment decision
As the Department of Education explains, a deferment to your student loans is a period during which repayment of the principal and interest of your loan is temporarily delayed.
During a period of deferment, you don’t need to pay anything on your loan. There is typically an agreement on the length of time you’re allowed to defer, depending on the program. Borrowers should also note that although deferment can include not having to pay the interest on their loan, this actually depends on the situation.
Loan types that do not require payment of interest when deferring student loans include:
- Direct subsidized loans
- Subsidized Stafford loans
- Perkins loans
- Direct consolidation loans (subsidized portion)
- FFEL consolidation loans (subsidized portion)
Loan types that do require payment of interest when deferring student loans include:
- Direct unsubsidized loans
- Unsubsidized federal Stafford loans
- Direct PLUS loans
- FFEL PLUS loans
- Direct consolidation loans (unsubsidized portion)
- FFEL consolidation loans (unsubsidized portion)
Depending on the category your student loans fall into, the government may or may not pay the interest on them. But if the interest isn’t covered, then you’ll either have to make monthly interest payments or allow the interest to capitalize, meaning it gets added to the total principal of the loan.
In most cases, you’ll need to apply for deferring student loans. If you’re deferring while in school — a situation in which your loan may be deferred automatically as your school reports your enrollment — you should speak with a financial aid representative who can help make sure deferment for both your public and private loans goes through.
If your loan came through the federal government, log in to the Federal Student Aid website to find the name of your servicer. If your loan is private, your job might be even easier: Call up the company through which your loan was financed. (And if you don’t know who your student loan servicer is, here’s how to track it down.)
Keep in mind that while forbearance is not the same as deferment, it might be another option to help manage your student loans.
Putting your student loan payments on pause may seem like a blessing, especially if you’re living paycheck-to-paycheck. However, you should also note potential downsides to deferment.
Pros of student loan deferment
Deferring your student loans in extreme cases of hardship could help you pay other immediate bills, such as rent and electricity. If you’re volunteering your time or serving in the military, temporarily not having student loan obligations might help give you back to your community without an additional burden on your mind.
Cons of student loan deferment
There are also drawbacks to student loan deferment, particularly if your loans aren’t subsidized by the federal government. The interest will continue to accumulate at the regular rate and then get added to the total of the loan.
For example, say the principal balance on your 10-year PLUS loan is $20,000 with a 4.8% interest rate. Applying for a six-month deferment will save you a significant amount in payments in the short term.
But if you use our calculator to run the numbers, you’ll see that you will have incurred $478 worth of interest.
Student Loan Deferment Calculator
This will also extend the amount of time it will take you to pay the principal. And if your ultimate goal is to conquer those student loans quickly, adding additional time and money to your payoff plan is not going to help.
In addition, you should consider that student debt in deferment can affect you if you’re involved in certain student loan forgiveness programs. For example, Public Service Loan Forgiveness requires 120 eligible payments to qualify. If you defer the loan for three months, the payments you miss during that time would not count toward the 120, even if you’re still working for a qualified nonprofit.
Your situation should guide whether deferring student loans is the right or wrong move. If you’re returning to school, joining the Peace Corps or taking care of a child before returning to school, for example, deferring student loans may be an absolute lifesaver and totally necessary to get by.
On the other hand, if you suffer a financial hardship but might still be able to keep paying down your loan, you might benefit from doing so, since it will get you out of debt all the sooner. Or you could just pay the interest on your loan each month to stop it from adding to the total balance of the loan.
If you decide deferring student loans isn’t the best option for you, there are several other ways you can reduce your student loan burden to make it manageable.
Work out a repayment plan
If you have private student loans, the first might be going straight to your lender and trying to work out a repayment plan. Lenders would rather see some of the money come back to them than none of it, so they may be willing to reduce your payments or work out another solution.
Income-driven repayment plans
With federal loans, meanwhile, you have some great alternatives. The government offers many income-driven repayment plans that can reduce your payments to an affordable portion of your disposable income.
Employer payment programs
With either private or federal debt, your employer may also have a program to help you pay off your loans. Check with your supervisor or human resources department to find out what programs might be offered.
Likewise, refinancing your student loans may be a way to help reduce your payments and, potentially, also cut the interest you pay. Just be careful about refinancing federal student loans, as you could lose access to some federal student loan options, like income-driven repayment.
Student loan deferments give borrowers experiencing financial difficulty a temporary break from the pressures of loan payments. In some cases, it makes sense to apply for a deferment, but there are also alternatives that may better fit your particular situation.
Talk to your servicer or provider and ask them about your options — including deferment, but also income-driven repayment and other possibilities — to keep yourself in your best financial situation possible.
Christina Majaski and Kristina Byas contributed to this report.
Interested in refinancing student loans?Here are the top 9 lenders of 2021!
|Lender||Variable APR||Eligible Degrees|
|1.88% – 6.15%1||Undergrad & Graduate|
|1.88% – 5.64%2||Undergrad & Graduate|
|2.50% – 6.85%3||Undergrad & Graduate|
|1.89% – 5.90%4||Undergrad & Graduate|
|2.25% – 6.39%5||Undergrad & Graduate|
|1.88% – 5.64%6||Undergrad & Graduate|
|1.90% – 5.25%7||Undergrad & Graduate|
|2.39% – 6.01%||Undergrad |
|2.13% – 5.25%8||Undergrad & Graduate|
|Check out the testimonials and our in-depth reviews!
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 June 1, 2021.
2 Rate range above includes optional 0.25% Auto Pay discount. Important Disclosures for Earnest.
Interest Rate Disclosure
Actual rate and available repayment terms will vary based on your income. Fixed rates range from 2.59% APR to 5.79% APR (excludes 0.25% Auto Pay discount). Variable rates range from 1.88% APR to 5.64% APR (excludes 0.25% Auto Pay discount). For variable rate loans, although the interest rate will vary after you are approved, the interest rate will never exceed 36% (the maximum allowable for these loans). Earnest variable interest rate student loan refinance 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 2.04% and 5.8% to the one month LIBOR. Earnest rate ranges are current as of 6/8/2021, and are subject to change based on market conditions.
Auto Pay Discount Disclosure
You can take advantage of the Auto Pay interest rate reduction by setting up and maintaining active and automatic ACH withdrawal of your loan payment. The interest rate reduction for Auto Pay will be available only while your loan is enrolled in Auto Pay. Interest rate incentives for utilizing Auto Pay may not be combined with certain private student loan repayment programs that also offer an interest rate reduction. For multi-party loans, only one party may enroll in Auto Pay.
Student Loan Refinancing Loan Cost Examples
These examples provide estimates based on payments beginning immediately upon loan disbursement. Variable APR: A $10,000 loan with a 20-year term (240 monthly payments of $72) and a 5.89% APR would result in a total estimated payment amount of $17,042.39. For a variable loan, after your starting rate is set, your rate will then vary with the market. Fixed APR: A $10,000 loan with a 20-year term (240 monthly payments of $72) and a 6.04% APR would result in a total estimated payment amount of $17,249.77. Your actual repayment terms may vary.Terms and Conditions apply. Visit https://www.earnest. com/terms-of-service, e-mail us at [email protected], or call 888-601-2801 for more information on our student loan refinance product.
Earnest Loans are made by Earnest Operations LLC or One American Bank, Member FDIC. Earnest Operations LLC, NMLS #1204917. 535 Mission St., Suite 1663, San Francisco, CA 94105. California Financing Law License 6054788. Visit earnest.com/licenses for a full list of licensed states. For California residents (Student Loan Refinance Only): Loans will be arranged or made pursuant to a California Financing Law License.
One American Bank, 515 S. Minnesota Ave, Sioux Falls, SD 57104. Earnest loans are serviced by Earnest Operations LLC with support from Navient Solutions LLC (NMLS #212430). One American Bank and Earnest LLC and its subsidiaries are not sponsored by or agencies of the United States of America.
© 2021 Earnest LLC. All rights reserved.
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 Laurel Road.
Laurel Road Disclosures
All credit products are subject to credit approval.
Laurel Road began originating student loans in 2013 and has since helped thousands of professionals with undergraduate and postgraduate degrees consolidate and refinance more than $4 billion in federal and private school loans. Laurel Road also offers a suite of online graduate school loan products and personal loans that help simplify lending through customized technology and personalized service. In April 2019, Laurel Road was acquired by KeyBank, one of the nation’s largest bank-based financial services companies. Laurel Road is a brand of KeyBank National Association offering online lending products in all 50 U.S. states, Washington, D.C., and Puerto Rico. All loans are provided by KeyBank National Association, a nationally chartered bank. Member FDIC. For more information, visit www.laurelroad.com.
As used throughout these Terms & Conditions, the term “Lender” refers to KeyBank National Association and its affiliates, agents, guaranty insurers, investors, assigns, and successors in interest.
Assumptions: Repayment examples above assume a loan amount of $10,000 with repayment beginning immediately following disbursement. Repayment examples do not include the 0.25% AutoPay Discount.
Annual Percentage Rate (“APR”): This term represents the actual cost of financing to the borrower over the life of the loan expressed as a yearly rate.
Interest Rate: A simple annual rate that is applied to an unpaid balance.
Variable Rates: The current index for variable rate loans is derived from the one-month London Interbank Offered Rate (“LIBOR”) and changes in the LIBOR index may cause your monthly payment to increase. Borrowers who take out a term of 5, 7, or 10 years will have a maximum interest rate of 9%, those who take out a 15 or 20-year variable loan will have a maximum interest rate of 10%.
KEYBANK NATIONAL ASSOCIATION RESERVES THE RIGHT TO MODIFY OR DISCONTINUE PRODUCTS AND BENEFITS AT ANY TIME WITHOUT NOTICE.
This information is current as of April 29, 2021. Information and rates are subject to change without notice.
5 Important Disclosures for SoFi.
Fixed rates from 2.74% APR to 6.74% APR (with autopay). Variable rates from 2.25% APR to 6.39% APR (with autopay). All variable rates are based on the 1-month LIBOR and may increase after consummation if LIBOR increases; see more at SoFi.com/legal/#1. If approved for a loan your rate will depend on a variety of factors such as your credit profile, your application and your selected loan terms. Your rate will be within the ranges of rates listed above. Lowest rates reserved for the most creditworthy borrowers. SoFi refinance loans are private loans and do not have the same repayment options that the federal loan program offers, or may become available, such as Income Based Repayment or Income Contingent Repayment or PAYE. SoFi loans are originated by SoFi Lending Corp. or an affiliate (dba SoFi), a lender licensed by the Department of Financial Protection and Innovation under the California Financing Law, license #6054612; NMLS #1121636 (www.nmlsconsumeraccess.org). Additional terms and conditions apply; see SoFi.com/eligibility for details. SOFI RESERVES THE RIGHT TO MODIFY OR DISCONTINUE PRODUCTS AND BENEFITS AT ANY TIME WITHOUT NOTICE.
6 Important Disclosures for Navient.
7 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 04/07/2021 student loan refinancing rates range from 1.90% APR – 5.25% Variable APR with AutoPay and 2.95% APR – 7.63% Fixed APR with AutoPay.
8 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 2.89%-4.78% APR and Variable Rates range from 2.13%-5.25% 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.