Deferment

Deferment summary:

• Loan deferment is a time period when you can stop paying your loan, but it remains current.

• Deferment is most common with federal student loans and is only available to eligible borrowers. 

• Loan balances may continue to accrue interest during the deferment period. 

Deferment Definition and Meaning

Deferment lets you skip loan payments for a certain amount of time without hurting your credit score or incurring late fees. It’s most commonly associated with federal student loans, though private lenders may allow deferment in certain situations as well. For other types of loans, a payment pause is usually called a forbearance. 

Interest may continue to accrue during the deferment period.

Deferment: A Real-Life Example

Let's say you're a college student who took out $5,000 in federal Direct Subsidized Loans and $5,000 in Direct Unsubsidized Loans. You’re still in school, and not ready to start making full loan payments yet.

Both types of student loans are typically eligible for deferment while you're enrolled in a higher education program at least half-time. This means you're not required to make payments, and skipping payments won't cause the account to show as delinquent on your credit report.

Subsidized federal student loans don't incur interest charges during the deferment period, but unsubsidized federal student loans do. You can choose to pay the interest on your unsubsidized student loans each month, but you don't have to. If you don’t pay the interest, the balance on your unsubsidized loans will grow.

After you graduate from college, you might qualify for a federal student loan deferment if you’re:

• Undergoing cancer treatments

• Experiencing economic hardship 

• Enrolled in an approved graduate fellowship program

• On active-duty military service

• In an approved rehabilitation program

• Currently unemployed

Check with your lender to determine whether you qualify for deferment under any of the above criteria.