Because of unpredictable changes that students experience while in school and even after, it would not be so much of a wonder that they not be able to fulfill their student loan responsibilities, i.e. paying their loan debt, even after the adjustment period of 6 months that student loan companies usually give. It may be because they still haven’t found a decent job, or they have incurred a disease which requires them to stay at home for a while, but for whatever valid reason they cannot pay their loan debts, there are ways by which students can get assistance and avoid paying their debts even for just a specific period of time.
Applying for student loan deferment or forbearance is one of the most feasible ways to postpone repaying the student loan if you still do not have the sufficient funds to do so. While many students look at deferment or forbearance as the ultimate solution to their financial difficulties, many of them have yet to understand what the advantages and disadvantages of applying for them. In any case, it is best to remember that deferment or forbearance should only be used when extremely necessary.
Deferment is basically a student’s legal entitlement to postpone or delay repaying a loan for a specific period of time. Forbearance is rather similar to deferment in that it also allows the student to temporarily postpone loan payments by talking to the respective lender and asking for more time to gather the necessary amount to continue his or her obligations.
The most common question posed with regards to deferment and forbearance is on the aspect of interest. Many students, desiring to cut down as much as they can from the total amount of their loan payment, want to know whether or not the loan interest accumulates over the period that they are in deferment or forbearance and if they can use it for tax deduction. The answer to this question actually depends on the type of loan that the borrower has. If the loan is unsubsidized, then the borrower has to pay the interest even when the loan is in deferment or forbearance. In contrast, borrowers need not pay for the interest if the loan is subsidized.
Now, can student loan interest be used as a tax deduction if the loans are in deferment / forbearance? The answer to this is a relative no. A person can only deduct the interest if he or she has paid it within the tax year. In short, zero interest paid, zero deductible. Thus, if an unsubsidized loan is in deferment or forbearance, and interest is not paid, then it cannot be deducted from tax.
