This post originally appeared onCredit.com.
Deferment is an option that lets you postpone both your principal and interest payments.
If you qualify, you’re able to pause payments for up to three years.
Forbearance is more temporaryyou can postpone or reduce your monthly payments for up to 12 months.
However, delaying your payments through deferment or forbearance can have serious financial repercussions.
Is Deferment or Forbearance Available on Private Loans?
Technically, deferment and forbearance are federal loan benefits.
Not allprivate loan servicersoffer similar optionsbut some do.
For example, SoFi offers deferment for students who are going back to school.
If youre experiencing financial hardship, its worth asking your servicer if deferment or forbearance is an option.
Just keep in mind that entering deferment or forbearance with private loans can be more expensive than federal loans.
There are often fees you have to pay, and interest will accrue while you postpone your payments.
At the end of the term, your remaining balance (if any) is discharged.
You still have to pay income taxes on the forgiven amount, however.
Enrolling in an IDR plan can drastically reduce your payments and give your budget more breathing room.
Refinancing
Unfortunately, if you have private loans, your options are more limited.
But one effective way to reduce your monthly payments is to refinance your debt.
By refinancing, you take out a new loan that pays off your old private loans.
Your new loan will have completely new terms, includingideallya lower interest rate.
Refinancing private loans can help lower your payments and help you pay less in interest over time.
Its a smart way to save money while giving yourself more room in your budget.
And in the case of private loans, postponing may not be an option at all.
Want to Pause Your Student Loan Payments?
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