Loan deferment is a program in which the payments will be reduced or not be required to pay back for a specific amount of time. The good thing about deferring your student loans if you lost your job, have military duty or go back to school is that interest will stop accruing for that period of time. You do not have to pay interest or the regularly scheduled monthly payment during this time period. This alone can be a life safer to many Americans who find themselves in a credit crunch and have too many bills.
There is also terms referred to as forbearance, this means that you can stop required payments for a specified amount of time. The difference between forbearance and deferment is that you don’t have to pay the required interest back on these types of loans. Yes forbearance will temporary suspend your monthly scheduled payments but the interest will continue to add up and increase the balance of your loan.
To sign up for either one of these programs you must file an application with your student loan consolidation provider. Student loans can also fall into default but can still be consolidated, many people fall into this category because of financial problems. The Loan can automatically go into default if you miss a monthly payment even one time. Missing your schedule payment does have a negative effect on your credit rating and can haunt you for a long time.
Make sure if you get into circumstances in which you can make your required monthly payment that you file for forbearance or deferment, this can save you a lot of headache in the long run and you’ll be glad you did it.