delaying student loan payments with defermentor forbearance if you have student loans and you can�tafford to make your monthly payments, you may want to consider delaying your repayment. the two main ways to delay payment on yourstudent loans are through deferment and forbearance. with both methods, you are basically puttingoff making payments on your loan. the difference
Student Loan Consilidation, is that deferment can cost less than forbearance. first let�s look at deferment. you may have the option to defer your federalloans if you�re back in school, in the military, or if you�ve become unemployed and havea financial hardship. these aren�t the only
scenarios--you can take a closer look at studentaid.ed.govto see which situations qualify. in any case, let�s start with a standardten-year repayment plan, where you�ve got thirty thousand dollars in loans, with fifteenthousand subsidized and fifteen thousand unsubsidized at a four percent interest rate. on a standardten-year plan, you would be paying� about three hundred five dollars a month. if you�re not sure what subsidized or unsubsidizedloans are, we talk about this in more detail in another video. but getting back to the chart, let�s sayyou decide to continue your education and will be studying full-time. since you won�tbe making an income during this time, you
decide to defer your loans for the first year. so during this year, you don�t have to makemonthly payments. but your subsidized and unsubsidized loans will behave a bit differently.interest won�t accrue on your subsidized loans, because the government will pay theinterest on these for you. so at the end of this period, you�ll still only owe fifteenthousand dollars, with no interest. however, interest will accrue on the fifteen thousanddollars of unsubsidized loans you have, which might work out to be around six hundred dollarsover the course of a year. and that six hundred dollars gets added to the principal on thisloan so that extra 600 begins to accrue interest as well.
now, you do have the option of paying themonthly interest while you�re in school, but for this example, let�s say you don�t.your year is up and you�ve still got fifteen thousand dollars in subsidized loans� andfifteen thousand six hundred dollars on your unsubsidized loans� leaving you with a balanceof thirty thousand six hundred dollars. now if you get on a ten-year plan, you�regoing to pay a slightly higher amount, than in your original ten-year plan perhaps aroundthree hundred ten dollars a month. what�s that look like over the next tenyears? you may pay seven thousand one hundred eighty dollars in interest over the life ofthe loan in comparison to the six thousand four hundred fifty dollars on the originalnon-postponed loan.
next, let�s look at forbearance. there aretwo types of forbearance: discretionary and mandatory. you can apply for a discretionary forbearancefrom your lender if you have a financial hardship or suffer from an illness, but it�s up toyour lender to decide to grant it to you. if you qualify for a mandatory forbearance,your lender is required to grant it. a common qualification for mandatory forbearance isfinancial hardship, but other circumstances might qualify you as well. in forbearance, you don�t have to make anymonthly payments, but interest will accrue on both your unsubsidized and subsidized loans.
so let�s look again at our example and seewhat happens if you need to put your loans in forbearance for one year. now, with interest accruing on both your unsubsidizedloans and your subsidized loans, you might be paying closer to twelve hundred dollarsin interest in this period�six hundred dollars for each of your loans. but just like deferment, you can choose topay your interest during forbearance, but again, let�s say you don�t and you letit accrue. when you get out of forbearance, that interest will be added to your principal. and when you get back on a ten-year plan aftera year, your new monthly payment might be
about three hundred fifteen dollars�fivedollars more than our deferment example� and ten dollars more than your monthly paymentif you hadn�t delayed repayment at all. and over ten years, you might pay seven thousandnine hundred ten dollars in total interest in comparison to six thousand four hundredfifty dollars total interest on the original non-postponed loan. of course, both these options are intendedto be temporary. you typically can�t be in forbearance for longer than twelve monthsand the length of time you can keep your loans in deferment can vary depending on your circumstancesand the types of loans you have. so, if you find yourself in a situation whereyou need to postpone repayment- deferment
or forbearance can be decent options, butlike everything else, there are trade offs, and it�s good to keep in mind that delayingpayment can come at an additional cost.
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