Whether or not you can defer student loans while pursuing a graduate degree can have a huge impact on your decision to continue your education. Currently, there are three different types of student loans available for all students: subsidized, unsubsidized and private student loans. Each of these loan types has different requirements for what payment is required during a deferment period, if an in-school deferment is offered at all.
Federal Subsidized Student Loans
Federal subsidized student loans, such as the Perkins Loan, allow for in-school deferment while pursuing a master's degree. To qualify, you must be enrolled at least half-time. With this loan type you will not be responsible for any interest payments during the in-school deferment and other authorized deferments, and interest will not be added to your principal balance for later payment. They are called subsidized loans because the interest payments during this time are subsidized by the federal government. However, once the authorized deferment period ends, you will be responsible for the principal and any interest that accrues after the deferment.
Federal Unsubsidized Student Loans
The federal government also offers unsubsidized loans. As with subsidized loans, they allow for in-school interest deferment with half-time enrollment.The one difference between the two is that you will still be responsible for the interest that accrues during the deferment period. You can either make the interest payments during the deferment period, or you can wait until you graduate -- or drop below half-time -- at which point the accrued interest will be added to the principal balance.
Private Student Loans
Private lenders do not have consistent requirements like the federal student loan programs do. The type of deferment, how long it will last and if it is offered at all depends largely on the private lender you will be getting a student loan from. Private student loans are not subsidized, and any interest accrued during allowed deferments will be added to the principal balance and calculated into the monthly payment at the end of the deferment.
Be sure to consider the 10 federal programs before applying for a loan from private lenders. The federal programs, for the most part, provide consistently better benefits such as: a fixed and lower interest rate -- which may be tax deductible -- no credit checks, various loan consolidation programs, if needed, and loans to subsidize the interest accrued during deferment. If the federal programs do not cover all your school expenses, then the difference can be made up in loans from private lenders.
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