A 2013 government study reports that, for the first time ever, more students than not rely on financial aid — federal financial aid in particular — to pay for their college educations. A large portion of those who need student aid borrow money through federal, state and private student loan programs. Unfortunately, circumstances after graduation don’t always make repaying student loans an easy process.
Whether it’s a soft job market, unforeseen circumstances or a return to school, you may find yourself in situation in which making your student loan payments is a challenge, if not downright impossible. Fortunately, federal loans can be deferred under several circumstances. You just need to meet the criteria for deferment, and you may be excused from making loan payments for up to three years. This list from Top5.com sums up most common reasons rather nicely.
The most common reason borrowers choose to defer student loan payments is unemployment. Without a steady source of income, repaying college loans is a struggle. In the post-recession economy, unemployment is a serious issue for borrowers and lenders alike, since the under- and unemployment rates for college graduates younger than 25 hovers around 50 percent. Even as the U.S. and the world continues to re-emerge from the Great Recession, as it’s being called, college graduates continue to have a difficult time finding jobs as they compete with older, more experienced individuals returning to the workforce.
Economic hardship is another reason borrowers tend to defer student loan payment. Welcome to the world of a liberal arts degree! Underemployed borrowers may find making their student loan payments overly burdensome. Although more jobs are being added to the economy, the pre-Recession pay rates have not bounced back to the previous levels across the board. Meanwhile, college remains awfully expensive. Deferment helps to alleviate some of the financial pressure that comes with a lower income. Economic hardship deferment is also available to volunteers in programs such as the Peace Corps or AmeriCorps.
Back In School
One of the best ways to get a leg up in a tough job market — or to increase your earning potential — is to enhance your education, or learn an altogether new skill. If you have graduated, but decide to return to school to complete a bachelor’s degree or graduate degree, you may be able to defer repayment of your student loans. Students enrolled at least half-time in a qualifying post-secondary program can defer repayment of their loans for as long as they’re in school. The principle behind this type of deferment is to afford students an opportunity to improve their career prospects without forcing them to work a job to repay their previous loans.
If you are in the military or join the military after school, you have a few different deferral options available to you. Active duty service personnel can defer their loans while on duty and for up to 13 months thereafter. You can also defer your loans if you’re called up for duty while you’re attending school at least half-time.
One lesser-known alternative for deferment of student loans is a graduate fellowship. In order to qualify, you need to have attained at least a bachelor’s degree. If you qualify, you can maintain the deferment until you complete or leave the fellowship program.
An important thing to keep in mind about deferment, however, is that it is by no means permanent. Unless you are one of the very few whose circumstances may qualify for forgiveness of student loan debt, you will, eventually, be required to make payments on your student loans.
To this end, be careful about how much you borrow, and especially lender sources. Private student loans are far more expensive — and much more difficult to defer — than government-sponsored loans.