Students and former students who are not financially able to make payments on their student loans can apply to have the loans put in deferment. If the lender grants deferment, the borrower can stop making payments on the loan for a specified time period. In general, student loan deferment neither helps nor hurts your credit score.
Payment History
The company that services your student loans reports your payment history and loan balance to the credit bureaus on a regular basis. When you miss a payment that you were supposed to make, this hurts your credit score. When you make payments on time and pay down your balance, this helps your credit score. When a loan is in deferment, the lender simply reports that the account is being paid as agreed because the deferment agreement states that you do not need to make payments. This does not help or hurt your score.
Loan Balance
The balance of your student loan will increase during deferment because of accrued interest unless you fall into one of two major categories. First, if you have a subsidized loan, the federal government pays all of the interest during deferment so your balance stays the same. Second, if you make voluntary interest payments during deferment, this keeps your balance from increasing. Otherwise, the interest is added to the loan balance when the deferment ends. If this occurs, the higher loan balance can slightly lower your credit score because you owe more money and have paid a smaller proportion of your initial loan balance.
Future Implications
Deferments never last forever, so you will need to start making payments on your deferred loan again in the future. If you miss the date when payments start again, you could end up with a late payment on your credit report, which will hurt your score. Or you might have trouble suddenly budgeting for the student loan payments and end up with late payments that way. In addition, if you did not pay interest during the deferment, your payments might be higher than you initially expected. For a good credit score, you must plan ahead and make student loan payments by their due dates when your deferment ends.
Tips
You must apply for deferment before you stop making payments on your student loan. To avoid damaging your credit, continue making payments until your lender has sent confirmation that your loan is actually in deferment. Otherwise, you could miss a payment, which would lower your credit score. In addition, some lenders do not grant deferment unless your account is in good standing. Therefore, plan ahead and apply for deferment as soon as you know you will need it. Lenders often grant deferment when you are in school at least half time, unemployed, serving in the military in active duty or suffering extreme financial hardship.
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