Can I Defer My Loans If I Go to Grad School?

Navigating student loan obligations while pursuing a graduate degree often presents financial considerations. Student loan deferment offers a temporary pause in payments, providing significant relief during graduate study. This allows borrowers to concentrate on academics without the immediate burden of monthly loan payments. Understanding how deferment works, especially for graduate education, involves knowing the eligibility criteria and implications for different loan types.

Understanding Eligibility for In-School Deferment

Eligibility for in-school deferment largely depends on the loan type and enrollment status. For federal student loans, borrowers generally qualify if enrolled at least half-time at an eligible college or career school. Half-time enrollment is determined by each institution, typically meaning three to four and a half credits per semester for graduate students. Students should confirm their school’s specific credit hour requirements to maintain eligible enrollment status.

Federal student loans, including Direct Subsidized Loans, Direct Unsubsidized Loans, Federal Perkins Loans, and Direct PLUS Loans (including Grad PLUS loans), are typically eligible for in-school deferment. Interest does not accrue on Direct Subsidized Loans while in deferment. In contrast, interest continues to accrue on Direct Unsubsidized Loans, Direct PLUS Loans, and FFEL Program loans during deferment, and this unpaid interest may be added to the principal balance later.

Private student loans have deferment policies that vary significantly by lender. There is no universal standard for private loan deferment, so borrowers must contact their specific loan servicer directly. They should inquire about available deferment options, eligibility requirements, and application procedures. To determine eligibility, borrowers should gather information about their current loans, including loan type and servicer, and their graduate program’s enrollment status.

Applying for Deferment

For federal student loans, deferment is often applied automatically once a student enrolls at least half-time in an eligible program. This occurs because educational institutions regularly report student enrollment information to loan servicers, triggering automatic deferment. Borrowers should still confirm that their deferment has been applied, especially after their enrollment is officially updated.

If automatic deferment does not occur or is delayed, borrowers can take proactive steps. They can contact the school’s financial aid office to ensure enrollment information has been accurately reported to loan servicers. Alternatively, they can submit an In-School Deferment Request form directly to the federal loan servicer. These forms are typically available on the servicer’s website or the Federal Student Aid website.

When completing the deferment form, borrowers will need to provide personal details, information about their educational institution, and specific enrollment dates. The form, along with any required supporting documentation, can be submitted to the loan servicer via mail or through an online portal. Certain federal deferment types, such as graduate fellowship deferment, require a specific application and direct communication with the servicer. After submission, borrowers should keep records of their application and monitor their loan accounts for confirmation of processing.

Implications of Deferment and Alternative Options

Deferring student loans while in graduate school has financial implications. For unsubsidized federal loans and all private loans, interest continues to accrue during the deferment period. This means that while payments are paused, the total amount owed can increase. Borrowers can make interest-only payments during deferment to prevent the loan balance from growing, which can reduce the overall loan cost.

At the end of the deferment period, any unpaid accrued interest on unsubsidized federal loans and private loans is added to the principal balance through capitalization. This increases the total principal amount, and future interest calculations will be based on this higher balance, leading to larger monthly payments and a greater total repayment amount. While deferment pauses the repayment clock, it also extends the overall repayment period once payments resume.

For federal loan borrowers, alternative repayment options exist. Income-Driven Repayment (IDR) plans adjust monthly payments based on a borrower’s income and family size, potentially resulting in payments as low as zero dollars for graduate students with limited income. These plans can also lead to loan forgiveness after a specified number of years, 20 to 25 years of qualifying payments. Forbearance allows for a temporary pause in payments, usually for shorter durations like 12 months, but interest accrues on all loan types during forbearance, making it less financially advantageous than deferment.