Student loan borrowers seeking student loan consolidation should be careful when switching lenders midway. There may be no savings when it comes to consolidating your student loans unless you save a substantial amount of money each month.
Yes, consolidation can slightly improve your interest rate, and you may be able to extend your loan term longer by refinancing student debt, or you may even save time and frustration by paying only one monthly bill. each month.
But consolidation is not the best option in all situations.
Borrowers who simply want to take a break from repaying their education loans until their personal finances improve can make a formal request to postpone their student loans, not consolidate them. In that case, they will need a better understanding of the basic differences between “student loan deferment” and “student loan forbearance.”
With so many struggling college grads these days looking for the best ways to keep up with their student loans, loan relief can often occur through one of two options: deferment or forbearance. And while they sound like they are the same, they are actually quite different.
If you are wondering what the difference between postponement vs. tolerance, you’ll find these terms used interchangeably quite often. But each term has its own unique meaning. By finally knowing the true definition, you will be able to choose the best option to postpone paying off your student loan debt instead of seeking a loan consolidation.
IN student loan forbearance is an agreement between you, the borrower, and your lender to temporarily suspend the monthly payments due on your school loans. Forbearance can also extend the time frame for making monthly payments, or even reduce the total amount of monthly payments in the short term.
The downside of forbearance is simply this: your loan accrues interest; the forbearance results in you having to pay more money than your original estimates in long-term college loan costs. Ultimately, you must pay off your student loans. Paying a higher total will cause pain then. But if you don’t have a job now, or are involved in an intense life-changing event, or are attending an advanced internship that will lead to better job prospects in the future, then indulgence may appeal to you.
On the other hand, a student loan deferment it is a specific period of time during which your student loan payments are postponed.
The federal government offers the exact definition of college loan “deferment” like this:
“A deferment is a temporary suspension of a borrower’s monthly loan payment. There are many different types of deferments available. During a subsidized loan deferment, principal payments are postponed and interest does not accrue.
“During unsubsidized loan deferment, principal payments are postponed but interest continues to increase. Unpaid accrued interest will be added to the principal (capitalized) balance of the loans at the end of the deferment period. This will increase the deferment amounts borrowers owe.”
Deferrals must have been requested and fully documented with a large amount of paperwork before they can be approved. No one will tell you that getting a student loan deferment will be an easy job. However, if you’re really struggling to make ends meet, this may be your best financial option right now.
There are several types of deferments that college loan borrowers can apply for. Deferral programs include:
Serving in the military, attending graduate school, experiencing financial hardship (such as unemployment), and joining the Peace Corps are just a few of the options that abound when it comes to deferring your student loans.
Forbearance, on the other hand, will usually be available in programs like these:
* Americorps Loan Forbearance (CNCS)
* Internship/residency forbearance
* Loan debt burden forbearance
* Teacher Loan Forgiveness Forbearance
The forbearance and deferral options available to you will vary. Each carries different immensely important requirements to follow exactly to the letter.
Private student loan borrowers are best served by contacting their own lender and trying to evaluate the best options available to them. Unfortunately, recent changes to federal student loan repayment options, which were originally intended to help consolidate and/or forgive education loans, do not include private loans at this time. Therefore, rather than seeking solutions to consolidate college loan debt, it may be more worthwhile to seek a deferment or forbearance to postpone repayment of the student loan.
