Decoding Financial Terms Pt. 1

A large part of why I began blogging about student loan debt is because I found people don’t fully know their options on how to manage student loan debt. The language that these student loan providers use can get a bit confusing.

In Part One of this series I wanted to discuss the difference between deferement and forebearance. If an individual is experiencing temporary financial difficulties and struggling to make on time payments then they can apply for deferement or forebearance.

Federal Student Aid simply defines deferement as a period during which repayment of principal and interest on your student loan(s) is temporarily delayed and you are not on the hook to make payments.

Depending on the type of loan you have, the federal government may pay the interest on your loan during a period of deferment. Contact your student loan

provider to confirm if your loans are eligible. If you don’t pay the interest on your loan during deferment, it may be capitalized (added to your principal balance), and the amount you pay in the future will be higher.

If you don’t qualify for deferment then you can apply for forbearance through your student loan provider which will allow you stop or reduce your student loan payments if approved. However interest will continue to accrue if you have subsidized or unsubsidized federal student loans.

If you are not clear on what type of federal student loans you have then the National Student Loan Data System (NSLDS) can provide access all your federal student loan information, including loan history, loan repayment status and contact information for your loan servicer.