Millions of students apply for student loans each year. They take these loans in the form of Stafford, Perkins, Plus and alternative student loans. The fact that a student must rely on a student loan to complete his or her education exposes the fact that there are some underlying financial difficulties that lead to the loan application in the first place. As a result, the possibility also exist that these students will also face financial difficulties after graduating if they are not in receipt of a well-paid job.

For these students defaulting on their student loan is not an option because by doing so they will destroy any little credit they have and that of their student loan cosigner. However, students should not despair, as there are many mechanisms in place to help students who have fallen into this hole. The government has put in place certain protection measures that can be employed to help these students through difficult times. Two of the most popular options that students can take are by applying for either a Deferment or forbearance on their student loan payments.

What is a Deferment?

A student loan deferment is a postponement in re-payments of your student loan. However, students must be reminded that for alternative student loans, although the payments on the principal have been suspended, students must maintain their monthly obligations to paying the required interest.

How one Qualifies for Student Loan Deferment

To qualify for deferment, students must first apply and meet the economic hardship criteria established by the lender. The criteria for deferment sometimes include if the student is still actively enrolled in a higher education facility, unemployed or on military deployment. For federal funded loans, the government pays the interest on these student loans while the loan is under deferment. In the case of alternative student loans, the student must pay the interest on student loans.

What is Forbearance on Student Loans?

If you were not successful in being granted a deferment on your student loan, the next option is to apply for forbearance. Under a forbearance of a student loan, the debtor is allowed to postpone repayments on their loan as long as they meet the creditor’s hardship criteria. However, unlike the deferral on the student loan, students must meet all interest payments every month to avoid defaulting on their loan. Students may qualify for student loan forbearance if they are unemployed, facing temporary financial difficulties, there is a natural disaster or on military deployment. Student loan forbearance is offered by all forms of lending institution whether government or non-government each of which will have their respective criteria.

How does Forbearance and Deferment affect my Credit Score?

Many be surprised that applying for student loan deferment or forbearance does more good than bad to your credit rating. Actually, applying for student loan forbearance or deferment saves your inability to meet your monthly financial obligations from being reported to credit agencies. However, this does not mean that these mechanisms should be abused, as creditors will only give so much latitude and no more.