Loan Servicing for Those in Need

Whether deferring student loans is the correct or incorrect decision really depends on your individual circumstances. If you’re facing health or financial hardship, deferring your student loan obligations might just be the appropriate thing for you to do at this time. However, determining whether or not to defer your student loan payments has never been an easy decision to make. This is because each of these decisions has different consequences, and many of them depend on what type of student loan you have.

There are two primary types of deferring student loans: federal and private. Private loans cannot be deferred until the borrower reaches his or her later years of college. Federal deferments are granted on a first-come-first-serve basis and must be applied for as early as the first year of college. It’s important to remember that deferment will have an impact on a borrower’s credit. A total amount of deferments will appear on their records, but the late payments and late fees will still be reported.

While deferring student loans is a tempting option, there are several reasons why it makes sense to avoid it. One reason that deferring makes sense is because it allows students to pay down their debt much faster. As stated above, deferring means that the borrowers will not have to pay back any of the principal that they accrued during their four-year college experience. If the student defaults on their loans, accruing late payments and fees, the remaining balance will have to be repaid in full. However, if the borrower decides to make payments while they are in school, they will be able to reduce their overall debt load much faster.

Another reason that deferring student loans makes sense is because federal interest rates are currently at historic lows. Even with bad credit, many students can qualify for subsidized and unsubsidized federal student loans. As a result, there has been an increase in the number of lenders willing to offer unsubsidized federal student loans at reasonable interest rates. This means that there are more options available to students with varying credit ratings. Interest rates are much more competitive, which is good news for borrowers who are trying to consolidate their student debt.

In addition to competitive private loans, deferring student loans is also available through some federal loans. The Stafford Plus and Perkins loans are two examples of federal loans that offer students deferment options. There are specific rules and regulations regarding deferments. It is important to understand the repayment plan and the specific details surrounding each deferment. As a result, students should always consult with a financial aid expert before deciding whether or not to pursue deferment.

One of the most compelling reasons for deferring student loans is to allow time for rehabilitation. When a borrower has a physical injury or illness that forces them to miss a significant portion of their college career, it may be in their best interest to consider loan deferment options. Loan repayments mean much less money for creditors, which means that they will be more inclined to make lower payments on student loans that are paid in full over time. As such, when a borrower needs to fill out and submit the proper cancer treatment deferment request form, they should never hesitate to do so.

There are other factors that make deferring student loans a good idea. Students who have experienced a recent academic downfall may not be sure what type of repayment plan to pursue. For them, the idea of loan deferment can make sense. In order to give themselves an advantage over more financially stable applicants, many lenders will forgive part of a borrower’s debt if they have experienced a financial hardship. Loan forgiveness will not necessarily apply to all student loans, but as a general rule, lenders will at least be willing to consider it as a possibility if it appears that a student has experienced a hardship. Loan deferment can be used as a means of improving one’s credit, but it can also be used to improve a borrower’s chance of qualifying for lower interest rates on their future student loans.

Borrowers who are unemployed or underemployed may be in a position that makes it impossible or too difficult to keep up with their student loans. In these situations, it can make financial sense to look into loan forgiveness programs. Loan forgiveness will reduce the balance owing on a borrower’s undergraduate loans and will reduce the monthly payments by a certain percentage. Loan servicer departments can advise a borrower of the pros and cons of this option and can provide additional information on eligibility. When applying for this type of forgiveness, borrowers must provide proof of their unemployment or underemployment.