How to Understand the Affect of Deferred Student Loans on Your Credit Rating

Deferring is not the same as defaulting. Defaulting on a loan is severely damaging to your credit rating, while deferment is common and usually goes unpenalized. Here are some steps to understand how a deferred student loan will affect your credit rating.

Instructions

    • 1

      Note that when you defer a loan, you enter an agreement with your lender to suspend repayment of the principle for a period of time.

    • 2

      Know that you must apply for deferment before you default. Be sure to make your payments during the application process.

    • 3

      Learn about federal loans. They can be deferred until graduation without penalty. These loans are designed to be repaid after you get your education.

    • 4

      Understand the duration of your grace period. After you drop below half-time enrollment (12 semester hours, usually) you have a grace period--6 months for Stafford loans, 9 months for Perkins loans--before you have to begin repaying your loan.

    • 5

      Explore the benefits of consolidation. If you consolidate your loan through a program--such as the Income Contingent Repayment Plan--all your loans will be combined and you will be given a new loan with new terms. This is one way to defer your payments without affecting your credit rating.

    • 6

      Look into private lenders. Almost all private lenders will offer deferment, but some require fees or quarterly interest payments.

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