How to Defer Undergrad Loans for Grad School
Navigate the complexities of deferring undergraduate student loans for graduate school. Gain insights into managing your payments effectively.
Student loan deferment offers a temporary postponement of federal student loan payments, particularly useful for individuals continuing their education, such as those pursuing graduate studies. It allows borrowers to temporarily suspend payment obligations under specific conditions, providing financial flexibility during periods of enrollment.
Understanding Deferment Eligibility and Types
Eligibility for deferring federal undergraduate student loans while attending graduate school depends on your enrollment status and the nature of your graduate program. An “in-school deferment” applies if you are enrolled at least half-time at an eligible college or career school. Generally, half-time means taking at least half of the full-time course load, which varies by institution. If you meet this requirement, your federal loans may be automatically placed into deferment as your school reports your enrollment status to your loan servicer.
Another type of deferment for graduate students is the “graduate fellowship deferment.” This is available if you are enrolled in an approved graduate fellowship program that provides financial support for your studies and research. Unlike in-school deferment, graduate fellowship deferment is not automatic and requires you to submit a specific request to your federal loan servicer.
A distinction among federal loans during deferment concerns interest accrual. For Direct Subsidized Loans and Federal Perkins Loans, the government pays the interest that accrues during deferment, meaning your loan balance does not grow. However, interest continues to accrue on Direct Unsubsidized Loans, Direct PLUS Loans, and Federal Family Education Loan (FFEL) Program loans while they are in deferment. If this accrued interest is not paid, it will be added to your principal balance when deferment ends, a process known as capitalization. For private student loans, deferment policies vary significantly by lender; contact your servicer to understand their options.
The Deferment Application Process
Initiating a deferment for your federal student loans involves specific steps. Obtain the appropriate deferment form from your federal loan servicer’s website or the Federal Student Aid website. These forms are specific to the type of deferment requested. Select the correct form to avoid processing delays.
Accurately complete all required sections of the form, including personal identification, educational institution information, and enrollment status. For an in-school deferment, your school’s financial aid office will likely need to certify your enrollment directly on the form, confirming half-time attendance. This certification ensures your enrollment meets federal requirements.
After the form is completed and certified by your school, submit it to your federal student loan servicer. Submission methods often include uploading through your servicer’s online portal, mailing, or fax. Keep a copy of your submitted form and any supporting documentation for your records.
After submission, confirm your deferment request has been received and processed. Track the status through your loan servicer’s online account or by contacting them directly. Continue making payments until you receive official notification that your deferment has been granted, as stopping payments prematurely could lead to delinquency.
Managing Your Loans During and After Deferment
Managing your loans effectively during a deferment period and preparing for repayment resumption are important for maintaining financial health. During deferment, particularly for unsubsidized federal loans and Direct PLUS Loans, interest continues to accumulate. While not required to make payments, you have the option to pay the accruing interest voluntarily. Paying the interest as it accrues can prevent it from being capitalized, meaning it will not be added to your principal loan balance.
If you choose not to pay the accruing interest on unsubsidized loans, this unpaid interest will be capitalized and added to your principal balance when your deferment period ends. Interest capitalization increases the total amount you owe and can lead to higher monthly payments once repayment begins.
Upon the conclusion of your deferment, your loans will enter repayment. A new grace period usually does not apply after a deferment period for most federal loans if one was already used. Your loan servicer will notify you before your repayment period resumes, outlining your new monthly payment amount and the date payments are due.
It is important to proactively track your loan status with your servicer throughout and after deferment to ensure the deferment was applied correctly and to be aware of your repayment start date. You can access your loan information through your StudentAid.gov account dashboard, which lists your loan servicers and details. If you anticipate difficulty making payments when deferment ends, contact your loan servicer to discuss available repayment plans, such as income-driven repayment options, which can adjust your monthly payments based on your income and family size.