Deferring Student Loans - The Pros and Cons

Is delaying the inevitable the best choice for your financial future?

So you've been out of school a few years, struggling with your bills and seriously considering deferring payment on your student loans until you can get your head above water. What options are available to you?

Before deciding to delay your student loan payments, consider what this might mean for your long-term financial future. While offering temporary relief, student loan deferment can result in having your loans trail after you like a ball and chain for a lot longer than is financially palatable. After all, there's nothing worse than paying off a student loan from a degree you earned years or even decades ago. Also, deferring your student debt can set a dangerous precedent for other aspects of your debt management: taking a cavalier approach to one kind of debt may tempt you to do the same with others.

Still, if you've crunched the numbers in your monthly budget and decided you want to call a temporary halt to your monthly student loan payments, you do have some options. Here is a list of circumstances where you may qualify for student loan deferment:

• Long-term or short-term disability: If you have suffered an injury that prevents you from working, either permanently or temporarily, you can apply to have your student loans deferred. The catch? You can't have had the injury while you were a student.
• Unemployment: If you're out of work, you can apply to have some or all of your student debt deferred. The catch? You need to prove you are actively looking for work.
• Economic hardship: If you're receiving certain types of social assistance, such as Supplemental Security Income or welfare, you may qualify to defer any student debt acquired after June 30, 1993. Even if you're not receiving any kind of assistance, you may still qualify. The catch? The formula to prove economic hardship - which includes your income, your monthly student loan payments and the national poverty level - is extremely complex.
• You're going back to school: If you're returning to the hallowed halls of academia, you can apply to have some or all of your debt deferred. Two catches: if you have consolidated your loan with a private lender, you may not to be able to defer, and with the cost of tuition rising more than twice the rate of inflation each year, chances are you're going to have to take on even more debt.
• Military service. Sign up with Uncle Sam and you can get a deferment on most or all of your loans. The catch? It may mean getting stationed in volatile war zones.

Another option available to you is getting forbearance on your loans. This isn't quite the same as deferment: forbearance is when your lender allows you to stop making payments for a set amount of time. The difference between deferment and forbearance is that with the latter your interest on the debt continues to accrue during the forbearance period, so this is not the wisest choice to make for your long-term financial health.

Another thing to keep in mind: Getting a deferment or forbearance does not lock in your interest rate (this is especially true if you have a Stafford loan), so when you eventually start back on your debts again, your monthly payment may increase.