Grad school loan deferment allows you to temporarily pause your monthly undergraduate student loan payments while you’re enrolled at least half time to allow you to focus on your studies or fellowship program.
It works for federal and private student loans, but there are some differences between how it works for both.
While it may be tempting to put your loan on hold while you go back to school, deferring may result in taking on additional debt, so there may be some drawbacks.
Let’s take a closer look at when grad school deferment makes sense and how it works.
How Does Deferment Work?
There are two deferment programs for grad students and they work for federal and some private student loans. Check with your servicer to be sure.
1. In-school deferment
In-school deferment suspends your loan payments while you’re enrolled at least half-time in a qualifying degree program. Direct PLUS Loan borrowers also get an extra six months of deferment after dropping below half-time status.
2. Graduate fellowship deferment
Going the fellowship route? Graduate fellowship deferment suspends your federal loans for the duration of your approved fellowship program. Private lenders may have their own requirements.
When Should You Defer?
Grad school loan deferment only makes sense if you truly can’t afford your monthly payments.
For one, it will extend the terms of your loan, so paying it off will take longer than in your original agreement.
But also, if you’re pursuing student loan forgiveness, a period of deferment typically doesn’t count toward your goal.
And you still may get charged interest for the period your payments are paused. That interest will accrue, which will increase the overall cost of the loan.
The Impact of Interest Accrual
When you defer loans in grad school, interest accrues for some federal student loans but not for all. Reach out to your student loan servicer to confirm or check the studentaid.gov website for more information. Interest typically accrues for private student loans, but each lender will have their own policy.
It’s important to take interest accrual seriously since it can impact the overall cost of your loan. The interest you accrue during deferment gets added to the principal amount, which is then charged your regular interest rate. So, if you defer a loan and are still being charged interest, you are in effect increasing the total of your principal.
How to Defer Private Student Loans in Grad School
You can defer College Ave loans while in grad school but all private lenders have their own policies. Be sure to reach out to discuss your options and goals.
How to Defer Federal Student Loans in Grad School
In-school loan deferment occurs automatically, your loan servicer enrolls you based on enrollment information received from your school. If this doesn’t happen—and you meet eligibility requirements—reach out to your loan servicer or fill out an in-school deferment request.
But graduate fellowship deferment does not. With graduate fellowship deferment, you must reach out to your loan servicer or submit a graduate fellowship deferment request.
Deferment vs. Forbearance
Forbearance is another option that pauses your student loan that can get confused with deferment. However, the two have some key differences:
- Deferment lasts longer and has more specific qualification criteria. Qualifying reasons for deferment include serving in the Peace Corps or being enrolled in school at least half-time,
- Forbearance is a temporary break in payments for those experiencing a personal or financial hardship who don’t qualify for deferment —like unemployment.
Grad School Loan Deferment Alternatives
When it comes to student loans, finding a way to pay at least something each month is ideal. That’s why a full deferment isn’t always the best choice.
Here are some alternatives.
Income-Driven Repayment Plans for Federal Student Loans. Income-driven repayment plans cap monthly federal student loan payments at a fixed percentage of your discretionary income. Some borrowers pay $0 a month.
- Student Loan Refinancing. Lower your monthly payment by refinancing at a lower interest rate or to a longer loan term. Refinancing involves obtaining a new loan to pay off all or some of your current loans. Refinancing your student loans can make payments more manageable and could even save you money over the life of your loan. Just know that by refinancing your federal student loans, you’ll lose out on benefits like income-driven repayment plans and Public Service Loan Forgiveness.
- Interest-Only Payments. Even if you choose grad school loan deferment, interest still accrues and then capitalizes on private and unsubsidized loans. Make interest-only payments on those loans to keep the balances from growing. You’d be surprised at how big of a difference it makes.
Learn more about how to pay for graduate school