What does it mean to defer college loans?

I'm trying to understand what it means to defer college loans. If I decide to defer, does it impact my credit or future payment plans? I'm wondering if it's a good option during tough financial times.

Deferring your student loans means that you temporarily pause making payments on your loans. This option can provide relief during financial hardship, allowing for some breathing room when you aren't financially able to make these payments.

It's important to know that deferment doesn't erase your loan; it just delays when you need to start paying it back. In most cases, interest does not accrue on subsidized loans during deferment, which means that the amount you owe won't increase. However, for unsubsidized loans and PLUS loans, interest will continue to accumulate during the deferment period and the accumulated interest will be added to your loan balance (capitalized), resulting in a larger loan amount.

Deferment is typically not reported as negative information to credit bureaus, so it's unlikely it will directly affect your credit score. However, your total debt does contribute to your credit health, so where it may impact is your debt-to-income ratio, which could potentially affect your ability to secure other loans like a car loan or mortgage.

Deferments are a temporary fix, not a long-term solution. It's important to have a plan for when your deferment period ends, as you'll be required to return to making payments on your loans. Before choosing to defer, it's wise to explore all your financial options, like income-driven repayment plans, which may be more beneficial in the long run.