Returning to school can come with many benefits. You might change your career trajectory or boost your earning potential by thousands of dollars by seeking an advanced degree or certification.
But as you embark on this new chapter of your higher education journey, you might be wondering how to keep up with your current student loan payments when you return to the classroom.
One question at the top of your mind is likely, “Do I have to pay student loans if I go back to school?”
Luckily, you might not have to juggle class and student loan payments. Learn more about how to defer student loans when going back to school.
Can you put your student loans on hold while you go back to school?
If you’re going back to school, you have a couple of options to manage your student loan debt burden as an enrolled student: deferment or forbearance. With the help of these options, you might not have to pay student loans if you go back to school.
If you have federal student loans, then deferment could be an option for you. Under deferment, you can put your student loan payments on pause for a specified period. In-school deferment for eligible federal loans is automatic, based on your enrollment information. You won’t have to complete an in-school deferment request in most cases, and you’ll receive a notification from your loan servicer that your loans have been put into deferment.
Whether you’re responsible for paying the interest that accrues during the deferment period depends on your loan type. If you have a Direct Subsidized Loan, then you won’t have to pay the interest that accrues while you’re in school. If you have Direct Unsubsidized loans, you’ll have to repay the interest that accrues during the deferment period.
There are many ways to qualify for deferment of federal student loans including:
- Enrollment in an eligible graduate fellowship program.
- Enrollment in an eligible college or career school on at least a half-time basis.
Although there are other reasons that might make you eligible for deferment, returning students should take careful note of the requirements above. You likely won’t be able to defer your federal student loan payments if you aren’t enrolled in a graduate program or another education program on at least a half-time basis.
But if you meet enrollment requirements, but haven’t received a notice from your servicer about an automatic deferment, complete an in-school deferment request to access this opportunity. If you make a request, don’t stop making payments on your student loans until your servicer confirms that your loans are on deferment.
Forbearance is another option for those seeking student loan payment relief. There are two types of forbearance: general and mandatory forbearance.
With general forbearance, also called “discretionary forbearance”, your loan servicer decides whether you qualify. You can request general forbearance due to financial difficulties, a change of employment, medical situations and other reasons. But your loan servicer decides if your loans can go into forbearance on a case-by-case basis.
With mandatory forbearance, your loan servicer is required to provide forbearance for your loans. Typically, mandatory forbearance only applies to Direct Loans and FFEL Program loans. Reasons for mandatory forbearance include participation in a medical or dental internship or residency program. Mandatory forbearance is helpful you if you’re returning to certain professional schools. But mandatory forbearance has limited availability for just 12 months at a time.
When you choose forbearance, you’re responsible for the interest accruing on the loan during this period. You can choose to pay off the interest throughout the forbearance period or have it added to your loan balance when the forbearance period ends. If you choose to have all of your accrued balance tacked onto the total balance, you’ll be facing an increased total debt burden which could delay your journey of being debt-free.
Currently, all federal student loans are in administrative forbearance with interest rates set to 0% for many types of student loans. That means you can stop making monthly payments from March 13, 2020 to at least September 30, 2021.
Alternative student loan options when going back to school
If forbearance or deferment aren’t on the table for you, or if you are uncomfortable putting off your student loan payments, then there are other options to consider. With lower monthly payment possibilities, a new repayment plan or refinancing situation could be the right move.
Seeking a new repayment plan
If you can’t afford your loan payments while you’re in school, you might want to consider changing your repayment plan. You can choose an income-driven repayment plan or an extended repayment plan to create a lower monthly payment.
Although these plans can increase interest charges over the lifetime of your loan, it can make in-school student loan payments more affordable. Reach out to your student loan servicer to learn about your specific repayment options.
Try a refinancing opportunity
Private student loans aren’t eligible for federal income-driven repayment plans. If you’re stuck with a high-interest private loans, refinancing could be a good opportunity. With a lower interest rate, you can secure a lower monthly payment for your loans. This is a valuable option if you’re returning to school and are on a budget, especially if your existing lender doesn’t offer in-school deferment.
Technically, you can also refinance federal student loans into a private loan. Be careful with this option. If you refinance your federal student loans, then you’ll give up certain protections and benefits offered by the federal government.
You can find the most attractive refinancing opportunities with the help of Student Loan Planner®.
Choosing the right student loan repayment strategy while in-school
If you’re going back to school, deferring your student loans should be a serious consideration. It’s a good temporary option to provide breathing room in your budget while you return to school.
Deferment is often favored above forbearance because you may have the opportunity avoid the interest accruing on the loan — if you have Direct Subsidized Loans. Other opportunities, such as choosing an income-driven repayment plan could also provide relief, but you will likely face mounting interest charges.
Either way, you have many options to avoid paying your federal student loans if you go back to school. However, most of these opportunities are only available for federal student loans.
Private student loan borrowers should talk to their lender to explore deferment opportunities while in-school. The deferment and forbearance options vary based on your lender. For example, SoFi offers deferment for its private student loans in some situations, including a return to school. Not all lenders are so generous, but it never hurts to ask!
Returning to school should be an exciting chapter in your life. There are many ways to take a break from federal student loan payments while you continue to pursue higher education.
Not sure which option is right for your unique situation? Take the time to set up a custom student loan repayment plan with a Student Loan Planner® consultant today.