Deferring student loans should be considered prior to graduation. It is important that you acknowledge and address educational expenses and student debt. It is equally important that parents and students begin this financial discussion prior to graduation. The graduate needs to understand that there are options for repayment available to those who have not yet entered the work place. Students can begin by contacting the lending institution to determine whether or not their loan is eligible for deferment.
When applying to have payments deferred:
1. Have a legitimate reason for deferring your loan. Putting off repayment doesn’t erase the debt, so just because you’re eligible doesn’t mean you should. Consider any rising interest rates or additional fees and costs for deferment.
Deferment options for federal loans vary depending on the type of loan and date the loan was incurred. You can get the following deferments for most loans:
In-school deferments for at least half-time study;
Graduate fellowship deferments;
Rehabilitation training program deferment;
Unemployment deferment not to exceed three years;
Economic hardship deferment, granted one year at a time for a maximum of three years; and
2. Establish a budget plan prior to graduation. Include your loan payments in the budget and determine the minimum salary required to meet your obligation.
3. There is no time like the present to sit down with a financial planner to consider the benefits of repayment now as opposed to repayment later. Identify the pros and cons of each.
4. Once you have contacted your lender, negotiate a solid repayment schedule that includes dates and terms prior to agreeing to the deferment.
Loan deferment terms and plans vary from institution to institution and lender to lender. Know yours:
For Federal Perkins Loans, contact your loan servicer or the school that made you the loan.
For Direct and FFELSM Stafford Loans, contact your loan servicer.
If you do not know who your servicer is, you can look it up in the U.S. Department of Education’s National Student Loan Data System (NSLDSSM).
Additional options may be available for private loans so check with individual lenders regarding their particular deferment or forbearance programs. But it is important to note that you are only eligible for a deferment if you have not yet defaulted on your loans.
5. Parents, guardians friends and relatives should take the time to review with the student his or her financial responsibility and discuss how decisions can impact their credit both short and long term. When it comes to preparing your graduate for the future, you’re all in it together.
Celebrate graduation and don’t let your finance mar your celebration or reflect badly on the institution that made you the loan. Ultimately how you handle your debt may impact other students access to loans and financial assistance.
Be careful, be diligent, be prudent and continued success.