If I Go to Graduate School Will My Loans Be Deferred?

If you are considering graduate school, understanding how your existing student loans might be affected is an important financial consideration. Student loan deferment offers a way to temporarily pause payments on your loans, allowing you to focus on your studies without the immediate burden of repayment. This temporary suspension of payments is available for borrowers who meet specific eligibility criteria, related to their enrollment status in an approved educational program.

Understanding In-School Deferment for Federal Loans

Federal student loans offer an in-school deferment option while you are enrolled in an eligible college or career school. To qualify, you must be enrolled at least half-time in a program that leads to a degree or certificate. This applies to various federal loan types, including Direct Subsidized Loans, Direct Unsubsidized Loans, Federal Family Education Loan (FFEL) Program loans, and Perkins Loans.

For many federal student loans, the in-school deferment process can be automatic. Your school reports your enrollment status to the National Student Clearinghouse, which notifies your loan servicer, initiating deferment. However, if deferment does not occur automatically despite your eligible enrollment, you may need to take action. This might involve contacting your school directly to ensure they report your enrollment information or submitting a deferment request form to your loan servicer.

A graduate or professional student with a Direct PLUS Loan may also qualify for an additional six months of deferment after they cease to be enrolled at least half-time. Other types of federal deferment exist, such as those for approved graduate fellowship programs, which may require a specific application.

Navigating Deferment for Private Loans

Deferment policies for private student loans differ significantly from those for federal loans. Unlike federal loans, private lenders vary widely in offering deferment options.

If you have private student loans, you must proactively contact your specific loan servicer or lender to inquire about their deferment policies. They will be able to provide details on any available in-school deferment options, eligibility requirements, and the application process. Private loan deferments often come with stricter terms compared to federal loans, and some lenders may require interest payments even during a deferment period.

Financial Aspects of Deferment

While deferment allows you to pause payments, it is important to understand the financial implications, particularly concerning interest. For most unsubsidized federal loans, such as Direct Unsubsidized Loans and Direct PLUS Loans, interest continues to accrue during the deferment period. This accrued interest will be added to your principal loan balance when the deferment ends, a process known as interest capitalization.

From that point forward, interest will be calculated on this new, higher principal amount, which can lead to higher monthly payments and a greater total cost over the life of the loan. The exception among federal loans is the Direct Subsidized Loan and Perkins Loan, for which the government pays the interest during deferment. For most private loans, interest continues to accrue during deferment, and if not paid, it will also capitalize, increasing your total debt.

Steps to Secure Deferment

To secure deferment for your student loans, the first step is to identify your loan servicers or lenders, as the application process varies depending on whether your loans are federal or private. For federal loans, your school’s financial aid or registrar’s office reports your enrollment status to the National Student Clearinghouse. This report triggers an automatic in-school deferment for eligible federal loans.

If automatic deferment does not occur, or if you have private loans, you will need to contact your loan servicer or private lender directly. You may be required to complete a specific deferment request form and provide supporting documentation, such as proof of your enrollment status. It is important to continue making your regular loan payments until you receive official notification that your deferment request has been approved to avoid late fees or delinquency. After submitting your request, regularly confirm your deferment status by logging into your online account or contacting your servicer to ensure the deferment is active and to understand when repayment will resume.