Making student loan payments can sometimes be a struggle. You might not know what to do if you're having trouble finding work, are still in school or recently had a financial setback.
Making late payments or missing payments has consequences that can be costly and harmful to your credit. Discover Student Loans doesn't charge any fees for the life of the loan, but many servicers do, including for late payments. Fees can either be a fixed amount or a percentage of your minimum payment. Signing up for automatic monthly payments is one way to help prevent late payments, and most servicers offer an interest rate discount, so you will also save some money.
After late or missing payments, the servicer may report this to the credit agencies, which may negatively impact your credit score. It's important to talk to your servicer as soon as possible — before you make a late payment or miss a payment — to discuss your situation and see what options you have. Struggling borrowers who have exhausted other options can talk to their servicer about putting their loans in deferment or forbearance. This gives borrowers a temporary reprieve from making payments, but can result in their monthly payments being higher when they come out of deferment or forbearance.
Student loan deferment is a temporary period during which you don't have to make payments. You won't get charged a penalty for missing a payment and it won't affect your credit.
Federal student loan servicers and many private student loan lenders, including Discover Student Loans, offer the following four types of deferment:
- In-school: when enrolled in an eligible school at least half-time. Deferment will continue between terms as long as the break is less than six months long.
- Active Military Duty: when on active military duty or performing qualifying National Guard duty.
- Public Service: when completing public service for an eligible organization.
- Residency: when enrolled in a health care residency program.
Deferment can last several years depending on the type of loan and reason. It is possible to qualify for more than one type of deferment during the life of your loan. It's important to check with your servicer to see what is available and the requirements. Deferment options for Discover student loans can be found here.
Unsubsidized federal student loans and private student loans continue to accrue interest during deferment, and the accrued interest capitalizes — which means it is added to the loan's principal balance — once the deferment ends. You can, however, opt to make payments (including interest-only payments), which keeps your principal balance from growing as much when deferment ends.
Student loan forbearance is another type of temporary reprieve from making student loan payments. Forbearance is often associated with financial hardship or illness and generally doesn't last as long as deferment. In some cases, you can qualify for forbearance if you don't qualify for deferment, and vice versa.
Like deferment, forbearance options vary by loan type and servicer. Both your private and federal student loans will continue to accrue interest during forbearance.
Discover Student Loans grants forbearance in the following circumstances:
- Medical disability
- Excessive student loan burden
- Financial hardship
If approved, your loans can stay in forbearance for a cumulative maximum of 12 months. Like deferment, unsubsidized federal student loans and private student loans continue to accrue interest during forbearance, and the accrued interest capitalizes — which means it is added to the loan' principal balance — once the forbearance ends.
Applying and Lifetime Caps
Generally, you must apply for deferment or forbearance and each servicer will have different eligibility criteria. It's important to continue making payments until your servicer approves your application. Most servicers will automatically grant in-school deferment with confirmation of at least half-time enrollment from your school, but it's important to follow up to ensure it's been done.
Keep in mind that there could be lifetime limits to deferment and forbearance. If you can resume making payments early, you may be able to end your deferment or forbearance and save the benefits should you need them in the future.
Before applying for deferment or forbearance, there may be less costly alternatives to consider. If possible, you may be able to change your repayment plan. Federal student loans have income-driven plans that can lower your payments based on your income and graduated and extended repayment plans. Discover Student Loans has hardship, reduced payment assistance and payment extension programs that could lower your monthly payment to $50 for up to six months.
Student loan consolidation for your federal student loans or refinancing your Discover student loans or other private loans may also be an option to help you manage your debt and lower your monthly payment. Remember that if you extend the time it takes to pay off your student loans in exchange for a lower monthly payment, you could end up paying more in interest in the long run.
Temporarily reducing or stopping your student loan payments might give you the breathing room you need to get into a financial situation where you can comfortably make payments in the future. Remember that when you resume making payments, your payment could be higher, so talk to your servicer about other repayment assistance options before taking a deferment or forbearance.