What is a Student Loan Deferment?

Matt Brady

A student loan deferment is when a creditor decides to grant the student borrower a period of time during which a loan may go unpaid. Once the agreed-upon time is up, the borrower must resume payments for the full amount of the loan. A student loan deferment can be granted for numerous reasons, not all of which are dependent upon economic hardship. Aside from being financially unable to meet payments, the borrower may be granted a deferment if called to active military duty, if he or she enrolls in more schooling, or as a result of other events which may disrupt the borrower's ability to make payments.

Payment on student loans are typically deferred until after graduation.
Payment on student loans are typically deferred until after graduation.

There are different ways to execute a student loan deferment. If the loan is subsidized, meaning that the borrower is not responsible for interest on the loan until payments are due, then the borrower may not be responsible for any payments whatsoever during the deferment period. If, however, the loan is unsubsidized, leaving the borrower responsible for all interest on the loan, then interest payments may still have to be made even during the deferment period. In either case, principal payments would be suspended.

The chances of being granted a student loan deferment don't only depend on the borrower's economic position, but on the type of loan in question. At different points in time, it may be easier to get a student loan deferment from the government than from a private lending institution, or vice versa. It all depends upon the creditor’s own set of lending criteria. Generally speaking, though, if the borrower is attending school a significant amount of the time, is unemployed or under some economic hardship, or deployed on military service, he or she is probably within the eligible demographic for deferments.

A student loan deferment is not the same as having one's debt forgiven — eventually the loan must be paid. In special cases, a second deferment may be granted by some lenders, but even then the loan must still be paid after deferment periods end. Individuals who don't qualify for a deferment, yet struggle to make payments, may qualify for a loan forbearance, a special deal worked out between the borrower and lender in which smaller payments may be made for a period of time. Payment reductions during forbearance periods are case specific, depending upon what works best for a particular lender and borrower. Lenders are typically eager to work with borrowers to help make ends meet, rather than risk the student defaulting on the loan.

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