8. Deferment and Forbearance
Sometimes, life throws curveballs, and you might need to postpone your loan payments. Understanding your options can help you navigate financial challenges when unexpected events occur. Here are two primary ways to defer your loan payments:
Deferment
Deferment allows for the temporary postponement of payments, often without accruing interest on subsidized loans. This can be a great option if you return to school, enter a graduate program, or face significant economic hardship. During deferment, you may not be required to make payments, and the government might cover the interest on certain types of loans, easing your financial burden.
Forbearance
Forbearance temporarily reduces or suspends loan payments, usually with continued interest accrual, regardless of loan type. This provision is a short-term solution for those experiencing financial difficulties, such as job loss, medical emergencies, or other significant life events. While in forbearance, your outstanding loan balance may grow due to interest, so it’s crucial to consider your long-term financial plan.
Understanding and utilizing these options can provide relief during tough times while helping to maintain your financial health.