Parent PLUS Loan Deferment: Understanding Your Options

Introduction

Parent PLUS loans are federal student loans that parents can use to help pay for their child's education. These loans can be a crucial resource for families looking to cover educational expenses, but managing them can sometimes be challenging. One important aspect of managing Parent PLUS loans is understanding the deferment options available to you. In this article, we will delve into what deferment means, how it applies to Parent PLUS loans, and what options you have if you're considering deferment.

What is Deferment?

Deferment is a temporary suspension of your loan payments. During a deferment period, you are not required to make payments on your loan. Depending on the type of loan and the terms of the deferment, you may not accrue interest, or the interest may be capitalized (added to your loan balance).

Parent PLUS Loans Overview

Parent PLUS loans are federal loans available to parents of dependent undergraduate students to help pay for college. Unlike other federal student loans, Parent PLUS loans are not need-based, and they require a credit check. Parents can borrow up to the cost of attendance minus any other financial aid the student receives.

Eligibility for Deferment

Not all borrowers are automatically eligible for deferment. For Parent PLUS loans, deferment is typically available in the following situations:

1. In-School Deferment: This is available while the student is enrolled at least half-time at an eligible institution. However, it's important to note that interest will still accrue during this period, and it will be added to the loan balance if not paid.

2. Economic Hardship Deferment: Parents who are experiencing economic hardship may qualify for this deferment, which allows them to temporarily stop making payments. This type of deferment also typically results in interest accrual, which will be capitalized.

3. Military Service Deferment: If a parent is called to active military service, they may be eligible for deferment. This deferment generally allows for a pause in payments during the period of service. Interest will continue to accrue, but there may be some relief available through military benefits.

How to Apply for Deferment

Applying for deferment involves several steps:

1. Contact Your Loan Servicer: Reach out to the servicer of your Parent PLUS loan to discuss your situation and request deferment. They will provide you with the necessary forms and information.

2. Submit Required Documentation: Depending on the type of deferment you're applying for, you may need to provide documentation. For instance, if you're applying for economic hardship deferment, you'll need to provide proof of income or other financial documents.

3. Complete Deferment Forms: Fill out the deferment request forms provided by your loan servicer. Be sure to carefully complete all sections and submit any required documentation.

4. Await Confirmation: After submitting your deferment request, your loan servicer will review your application and notify you of their decision. Keep track of any deadlines or follow-up requirements.

Impact of Deferment on Your Loan

While deferment can provide temporary relief, it’s essential to understand how it affects your loan:

1. Interest Accrual: During most deferment periods, interest continues to accrue on Parent PLUS loans. This means that while you’re not making payments, the amount you owe will grow. Be sure to factor this into your financial planning.

2. Loan Balance Increase: If you do not pay the interest during the deferment period, it will be added to your loan principal when the deferment ends. This can significantly increase your total loan balance and the amount you will need to repay.

3. Credit Impact: Deferment should not negatively impact your credit score, as long as your loan is in good standing. However, it's important to continue monitoring your credit reports and ensure that the deferment is properly recorded.

Alternatives to Deferment

If you find that deferment isn’t the best option for you, consider these alternatives:

1. Income-Driven Repayment Plans: These plans adjust your monthly payments based on your income and family size. They can provide lower payments and can be a good alternative to deferment if you are struggling financially.

2. Partial Payments: If you can’t afford full payments, consider making partial payments. Even small payments can help reduce the amount of interest that accrues and prevent your loan balance from growing too quickly.

3. Loan Consolidation: Consolidating your loans into a Direct Consolidation Loan may provide you with more flexible repayment options and potentially lower monthly payments.

Conclusion

Deferment can be a useful tool for managing your Parent PLUS loans, but it’s important to understand the implications. Interest accrual and potential increases in your loan balance are significant considerations. By exploring all your options, including deferment and alternatives, you can make informed decisions that best suit your financial situation. Always stay in touch with your loan servicer and keep track of your loan status to ensure you are making the best decisions for your financial future.