Will My Student Loans Stop If I Go Back to School?

Returning to school often raises questions about how it affects existing student loans. Many wonder if payments can be paused while pursuing further education. It is often possible to temporarily stop or reduce student loan payments through specific mechanisms.

Conditions for pausing payments

The primary method for pausing federal student loan payments while in school is through in-school deferment. Eligibility requires enrollment at least half-time at an eligible college or career school. Federal loans are often automatically placed into deferment by the loan servicer based on enrollment information provided by the school.

Federal student loans, including subsidized and unsubsidized types, differ in interest accrual during deferment. For Direct Subsidized Loans, the government pays the interest that accrues, so the loan balance does not increase. For Direct Unsubsidized Loans and PLUS loans, interest continues to accrue. This unpaid interest will be added to the principal balance at the end of the deferment period, a process known as interest capitalization, which increases the total amount owed.

Private student loans operate under different rules, as their deferment policies are determined by the individual lender. While some private lenders offer in-school deferment options, the terms and conditions, including whether interest accrues and capitalizes, can vary significantly. Borrowers with private loans should contact their specific loan servicer to understand their available deferment options and any associated costs. Loans must be in good standing and not in default to qualify for deferment.

How to initiate the pause

Initiating an in-school deferment for federal student loans often happens automatically once your school reports your enrollment status. Federal loan servicers access enrollment information to update loan statuses. If your loans do not automatically enter deferment after enrolling at least half-time, contact your school’s financial aid office. They can verify and report your enrollment status to your loan servicer.

Alternatively, you can directly contact your federal loan servicer to request an In-School Deferment Request form. Complete this form and have your school certify your enrollment status. You or the school can then submit the form to your loan servicer. Continue making scheduled payments until you receive confirmation that your deferment request has been approved to avoid delinquency.

For private student loans, contact your private loan servicer directly. Each private lender has specific procedures and forms for requesting deferment. You will likely need to provide documentation of your enrollment. Prompt communication with your servicer is important to understand their requirements and ensure a smooth application process.

What happens after the pause

Once you graduate, withdraw, or drop below half-time enrollment, your in-school deferment for federal student loans will end. Most federal student loans, such as Direct Subsidized and Unsubsidized Loans, include a grace period, usually six months, before repayment obligations begin. This period provides time to prepare financially. PLUS loans may also have a six-month deferment after enrollment drops below half-time.

For unsubsidized federal loans, interest accrued during the deferment period that was not paid will be capitalized. This increases the total amount on which future interest is calculated, leading to a higher overall cost for the loan. Paying accrued interest during deferment can help mitigate this increase.

Your loan servicer will notify you before your repayment period begins, providing details about your new monthly payment amount and due date. It is advisable to explore repayment plan options, such as income-driven repayment plans, if you anticipate difficulty making payments. Maintain updated contact information with your loan servicer to ensure you receive all communications regarding your loan status.