Deferment is a temporary postponement of loan payments, during which interest may or may not accrue, depending on the type of loan. In the context of study abroad loans, deferment offers borrowers the option to temporarily halt their loan payments under specific circumstances, providing financial relief during challenging periods.
Key Aspects of Loan Deferment
Temporary Suspension of Payments
Deferment allows borrowers to temporarily stop making payments on their study abroad loans. This can be beneficial during times of financial hardship, unemployment, or enrollment in a qualifying educational program.
Interest Accrual
Depending on the type of loan, interest may or may not accrue during the period. In the case of subsidised federal student loans, the government may cover the interest, while with unsubsidized loans and private loans, interest typically continues to accrue.
Qualifying Conditions
Deferment is generally granted under specific conditions, such as enrollment in a degree program, economic hardship, active military duty, or during the post-graduation grace period. Borrowers must meet the eligibility criteria set by the loan servicer.
Loan Deferment Decoded
Returning to School
Borrowers who decide to pursue additional education, either by enrolling in a new degree program or attending a qualifying educational institution, may be eligible for deferment. This allows them to focus on their studies without immediate loan repayment obligations.
Financial Hardship
Deferment is an option for borrowers experiencing financial difficulties, such as unemployment or significant income reduction. It provides a temporary reprieve from making loan payments until the financial situation stabilises.
Active Military Duty
Members of the military who are called to active duty may qualify for deferment during their service. This ensures that military personnel can focus on their duties without the burden of student loan payments.
Post-Graduation Grace Period in Loan Deferment
Some loans offer a grace period after graduation before repayment begins. During this time, borrowers may choose to defer payments, especially if they are actively job hunting or experiencing other transitional challenges.
The Bottom Line is
Deferment is a valuable tool for borrowers facing temporary financial challenges or significant life changes. It provides breathing room by suspending loan payments for a specified period. However, it’s crucial for borrowers to understand the terms and conditions of deferment, including whether interest accrues during the period, and to communicate with their loan servicer to ensure compliance with eligibility criteria and a smooth transition back to regular loan payments.