Student Loan Refinancing

Written by Mark Sanfilippo
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When it comes to student loan consolidation or refinancing, there are a lot of terms and conditions that go along with most programs. You would be well advised to make sure that you understand these terms and conditions before you sign on the dotted line. A couple of the most misunderstood terms are forbearance and deferment.

Forbearance and deferment are a couple of very powerful tools for helping you avoid going into default. Both of them deal with delaying the payment of your loans, but they each have their own specific criteria for usage. Forbearance is a process whereby you can effectively "stall" your monthly student loan payments. Interest will continue to accrue on your principle, but you won't have that monthly student loan bill to worry about.

Deferment is by far the better of the two options. Deferment essentially allows you to stall your monthly student loan payments without accruing additional interest, and thus not adding to the grand sum total of your principle. Obviously, if given the choice most would choose deferment over forbearance, but there are some fairly strict criteria for entering into either deferment or forbearance.

Economic Hardship Is Generally the Key

Deferments are in general only granted to those who are still in school at least part time. They may also be granted if you have been unable to acquire a full-time job in a specified number of years. Forbearance is a little more lenient. In order to go into forbearance, you generally just have to show that your monthly debt is in a significantly unequal ratio to your monthly income. Don't let the thought of being turned down deter you from attempting to go into forbearance or deferment. These two options can really save you financially, and both are far better options than going into default.

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