Student Loan Hold: What It Means and How to Get Out of It

As a student, you might have taken out a loan to pay for your education. However, sometimes circumstances change, and you may find yourself unable to repay your loans on time. This can result in your student loan going into default or being placed on hold. In this article, we will discuss what it means to have a student loan hold and what options are available to get out of it.

What Is a Student Loan Hold?

A student loan hold, also known as a loan forbearance or deferment, is when the lender temporarily suspends or reduces your loan payments. This can be a helpful option if you are experiencing financial hardship, going through a medical issue, or facing other unforeseen circumstances that make it challenging to pay back your loan on time.

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How Does a Student Loan Hold Work?

When your student loan is placed on hold, you are not required to make any payments during the hold period. Interest may still accrue on your loan, but it will not be added to your principal balance until the hold period ends. Depending on the type of hold, you may be responsible for paying the interest that accrues during the hold period.

Types of Student Loan Holds

There are two types of student loan holds: deferment and forbearance.

Deferment

A deferment is a temporary postponement of your loan payments. You may qualify for a deferment if you meet certain criteria, such as:

• Enrolled in school at least half-time
• In a rehabilitation program for a disability
• Unemployed or unable to find full-time employment
• Serving in the military

During a deferment, you may not have to pay the interest that accrues on your subsidized loans. However, you will be responsible for paying the interest that accrues on your unsubsidized loans.

Forbearance

Forbearance is also a temporary suspension of your loan payments. However, unlike a deferment, interest will continue to accrue on both your subsidized and unsubsidized loans. You may qualify for a forbearance if you are experiencing financial hardship, medical issues, or other unforeseen circumstances that make it challenging to pay back your loan on time.

There are two types of forbearances:

• General forbearance
• Mandatory forbearance

A general forbearance is available for borrowers who are not eligible for deferment but are experiencing financial hardship, medical issues, or other unforeseen circumstances. A mandatory forbearance is required by law for borrowers who meet certain criteria, such as:

• Serving in a medical or dental internship or residency program
• Serving in AmeriCorps
• Receiving a National Guard forbearance

How to Get Out of a Student Loan Hold

Getting out of a student loan hold will depend on the type of hold and your circumstances. Here are some options:

Deferment

If you have a deferment, you can get out of it by:

• Graduating or dropping below half-time enrollment
• No longer being in a rehabilitation program
• Finding full-time employment
• Completing your military service

Forbearance

If you have a general forbearance, you can get out of it by:

• Starting to make payments again
• Paying off the entire loan balance
• Applying for a deferment or different type of forbearance

If you have a mandatory forbearance, it will end automatically after the specified period.

Impact of Student Loan Hold on Credit Score

When your student loan is on hold, it will not affect your credit score. However, if you default on your loan, it can have a significant negative impact on your credit score. Default can lead to wage garnishment, tax refund interception, and other consequences that can affect your financial stability.

Alternatives to Student Loan Hold

While student loan hold can be helpful in certain situations, it is not always the best solution. Here are some alternatives to consider:

Income-Driven Repayment Plans

If you are struggling to make your monthly payments, an income-driven repayment plan may be a good option. These plans set your monthly payment amount based on your income and family size, making your payments more manageable.

Loan Consolidation

Loan consolidation is when you combine multiple federal loans into one loan with a fixed interest rate. This can make your monthly payments more manageable and reduce the number of payments you have to make.

Loan Forgiveness

If you work in certain professions, such as teaching or public service, you may be eligible for loan forgiveness. This means that a portion or all of your loan may be forgiven after a certain period of time.

Conclusion

A student loan hold can be a helpful option if you are experiencing financial hardship, medical issues, or other unforeseen circumstances that make it challenging to pay back your loan on time. However, it is not always the best solution. Consider all of your options, such as income-driven repayment plans, loan consolidation, and loan forgiveness, before choosing to put your loan on hold.

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