Postponing repayment can be a very helpful way to put your student loans on hold for a while. There may be times when even an affordable repayment plan is too much for you. You may be temporarily unemployed or unable to deal with your student loan payments for other reasons, such as active duty military service.The good news is that you can suspend your payments, at least for a while, in limited circumstances.
The bad news is that in many cases, your interest will continue to accrue when you postpone payments and will be added to your principal when you begin repaying again. This is a common way that loan amounts can grow to unmanageable levels. Borrowers who need deferments and forbearances may be less likely able to pay back an even larger loan, and find themselves worse off at the end of a break in repayment than before. Be sure you know the consequences of postponing repayment, and if you have unsubsidized loans, try to start paying them back as soon as possible to limit interest capitalization.
The first category of suspensions, grace periods, automatically come with most loan programs. Lenders will give you a break so that you don’t have to start repaying right after graduation or withdrawal from a school.
The second category, deferments, are available if you meet certain conditions, such as unemployment or economic hardship, and only if you are not yet in default on your loans. You will not be charged interest on subsidized loans during a deferment period. Deferments are available only if you are not in default on your loans.
Forbearances also allow you to suspend payments and should be available even if you are in default, but you will be charged interest during forbearance.