According to a study by the National Post-secondary Student Aid Study (NPSAS), 65.6% of seniors have had to borrow money to finance their higher education. Whilst many individuals will find work and not face money issues, this won’t be the case for everyone. Student loan deferment allows someone to stop making repayments for a finite period of time until their circumstances improve. Whilst it is a recognition that life rarely goes according to plan, deferment doesn’t reduce student loan debt.
What is Student Loan Deferment?
Deferring student loan repayments may be possible for up to 3 years, provided that the borrower hasn’t previously defaulted on an agreement. An account is technically considered to be in default when payment hasn’t been received within the last 270 days of the due date. It is normally possible to defer student loans when the borrower is struggling because of financial difficulties and/or is experiencing problems finding suitable employment. Unfortunately, for anyone who doesn’t have a subsidised federal loan, interest will continue to accrue throughout the period of deferment.
Student Loan Forgiveness Programs
Certain public sector occupations that are vital to the local community, such as teaching and nursing, may qualify for a student loan forgiveness program. Each year of service will typically reduce the amount owed to the federal government by a set percentage. Before deferring a student loan, it is sensible to see if there are any programs that provide a better alternative. This will not help those with private bank loans.
Avoid Student Loan Deferment with AmeriCorps
Well over 540,000 Americans have volunteered to help AmeriCorps State and National, AmeriCorps VISTA, and AmeriCorps NCCC. The aim of these programs is to help those who are less fortunate through a 9 to 12 month work program. Volunteers are paid up to $12,125 for their work. With over 75,000 paid positions available each year, it could provide a better alternative than choosing to defer student loan repayments.
Defer Student Loans or Live with Parents?
The cost of renting an apartment isn’t cheap. Rather than applying for a period of student loan deferment, it may be more effective to use any available disposable income to increase student loan repayments and reduce the overall debt burden. This simple lifestyle adjustment could mean that any money owed is cleared within 2 to 3 years.
Defer Student Loans or Seek an Alternative?
Whilst student loan deferment and/or forbearance shouldn’t necessarily be avoided, they aren’t a long-term solution to debt clearance. Remember that student loan debt cannot normally be written-off. Volunteer work, student loan forgiveness programs or living at the parental home could offer a better alternative to deferring student loan repayments.