Comments on: How to avoid unwanted student loan deferment

Question: How to avoid unwanted student loan deferment

mahamandarava — Fri, 14 Dec 2007 23:26:09 -0800

My student loans were put on deferment against my will -- how do I prevent this from happening in the future?

I have a large federal consolidation loan from graduate school. I am now working full time and paying off my loans (automatic deductions from my bank account). This last semester I signed up for several classes at a community college. A month or so later, the U.S. Dept. of Ed sent me a notice saying my loan was put on deferment due to my part time student status.

I do not want to be put on deferment. I did not ask to be put on deferment. I want to pay off my huge debt as soon as possible! So I called up the Dept. of Ed. and asked to be taken out of deferment. The rep I spoke to did that (although my loans still went unpaid for a couple months). I then asked to not be put on deferment again without my OK. I was told that the deferment is automatic if my school reports my part time student status to them, and that if I wanted to stop this from happening in the future, I would have to tell my school not to release my student status to the Dept. of Ed.

So now I'm registering for next semester's classes and I don't want this to happen again. I went to my school today and asked them not to report my student status to the Dept. of Ed. The guy I spoke to told me there was nothing he could do, that they had to give that information if they were presented with a signed release. I don't remember ever signing a release, but who knows. I suspect either the school or the Dept. of Ed. or both is giving me inaccurate information. Googling this returns nothing -- all the sites I find talk about how to get a deferment, not how to get rid of one.

By: saeculorum

saeculorum — Fri, 14 Dec 2007 23:28:17 -0800

Simply pay your debt anyway - there's nothing stopping you from doing that. If your loan company won't take the money out automatically, have your bank automatically send the loan company money via a bill pay. I think you're overthinking your "problem."

By: mge

mge — Sat, 15 Dec 2007 00:15:10 -0800

One thing to note about proactively paying student loans is sometimes you have to do a little extra work to get them to apply the amount your paying to the principal instead of them adding it as a credit on your account that they take future payments out of.

By: bluejayk

bluejayk — Sat, 15 Dec 2007 00:25:14 -0800

While in deferment, your federally subsidized loans won't accrue interest. Don't know if a federally consolidated loan fits in with that. And you can make payments like normal if you like.

By: null terminated

null terminated — Sat, 15 Dec 2007 02:01:57 -0800

Deferment is great. There's no interest but you can still pay off your loans. Stay on it as long as you can.

By: chinston

chinston — Sat, 15 Dec 2007 07:04:00 -0800

Yes, if you can confirm that while in deferment, your loans are not accruing interest, then (other than the psychological fact of having loans to pay off) you don't have any reason to pay them down. Inflation and the passing of time is almost always to a borrower's advantage.

By: unknowncommand

unknowncommand — Sat, 15 Dec 2007 07:22:07 -0800

You can still pay while you are in deferment. It is not a problem.

By: gum

gum — Sat, 15 Dec 2007 09:06:24 -0800

A deferment is free money. It's folly not to take it. Get your bank to make automatic payments in the same amount into an investment fund at a rate of risk/return of your choice and pay your student loan later, when inflation and your rising income make it additionally easier to do so.

By: mahamandarava

mahamandarava — Sat, 15 Dec 2007 11:17:29 -0800

Thanks guys. I'll have to check to make sure that my loans aren't accruing interest during the deferment, but I'm glad to have a new, more positive outlook on it.

By: dhartung

dhartung — Sat, 15 Dec 2007 12:54:53 -0800

Here are the official rules:

As long as the student borrower is enrolled at least half-time..., no interest accrues and no payments are required until after a six-month grace period after the student ceases to be enrolled at least half-time.

It also says There is no pre-payment penalty, however, at any time.

Assuming your loans were accrued after 1993.

By: acoutu

acoutu — Sat, 15 Dec 2007 14:17:39 -0800

Assuming there is no penalty for prepayment, just maintain the deferral while making payments. I paid off my entire student loan while on deferral, avoiding any interest costs. Alternatively, you could invest what you would otherwise use as a payment (in a secure, fixed rate investment) and simply use it to make a balloon payment when the deferral period ends. For example, if you are on deferral for 1 year and you would have paid down $2,000, you could instead invest that amount at, say, 5% and thus have a balloon payment of $2,100.

By: dmd

dmd — Sun, 16 Dec 2007 16:35:14 -0800

Confirming prior answers: You are in essence asking "Please let me figure out how to pay more money than I should."