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We’re glad you’re here. In this article, we’ll be going over the details of student loans and what happens when you go back to school. You might have a lot of questions about student loans, but don’t worry—we’ve got your back.

Student loans are one of the most complicated financial products out there, and it can be confusing to figure out if you should take one out for college or not. But don’t worry—we’ll walk you through all of that in this article.

We’ll start by explaining what student loans are, how they work and what they cost. Then we’ll talk about whether or not taking out a student loan is right for you, depending on your personal situation and goals for college. From there, we’ll talk about how to actually apply for a loan and get approved (which isn’t always easy). And finally, we’ll wrap things up by talking about what happens when you go back to school after taking out a loan in order to help ease some concerns you might have about continuing with payments while also attending school full-time.

How to Defer Student Loans When Going Back to School

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Note that the situation for student loans has changed due to the impact of the coronavirus outbreak and relief efforts from the government, student loan lenders and others. Check out our Student Loan Hero Coronavirus Information Center for additional news and details.

If you’re pursuing a master’s or other advanced degree, you may not have the means to pay back student loans while you’re busy with your studies. In this case, you’ll need to know how to defer student loans when going back to school.

Fortunately, you can postpone payments on your federal student loans while you’re in school through deferment. And although this isn’t always an option with private student loans, you can also consider refinancing for potentially better rates and adjusted monthly payments.

Let’s consider both options so you know what to do with your student loans before you head to graduate school. Let’s look at…

How to Go Back to School With Defaulted Student Loans

You can’t go back to school with defaulted student loans until you get out of default.Anna HelhoskiJul 23, 2021

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If you need solutions for your student debt:

• Find help: Options for legit student loan help resources and organizations to contact.
• Pause payments: Find out the differences between student loan forbearance and deferment.
• Get out of default: Learn the consequences of and remedies for defaulting on your student debt.
• Declare bankruptcy: Explore how to discharge student debt in bankruptcy.

Defaulting on your student loans could be a barrier to returning to school, but not one that’s impossible to clear. To access financial aid again, you’ll first need to get out of default.

Federal student loans go into default if you let 270 days pass without making a payment. Being in default disqualifies you from receiving federal financial aid, including Pell Grants and federal student loans, which might be vital to making a return to school affordable.

To get your federal student loan out of default, you have four main options:

1. Repay your loans in full: This option is the least likely since most people don’t have large sums of money to pay off loans all at once.

» MORE: Can a college withhold transcripts?

2. Rehabilitate your loans: Through student loan rehabilitation, you can return your loans to good standing and remove the default from your credit report. You must agree to make nine monthly payments over 10 months in an amount that equals 15% of your income, or a smaller amount based on your overall finances.

You can rehabilitate your loans only once, so consider enrolling in an income-driven repayment plan after your rehabilitation period ends to make payments more manageable. Income-driven repayment ties payments to a portion of your income and extends the repayment period. At the end of that period, the remainder of your loan is forgiven.

3. Consolidate your loans: Consolidate your loans into one new loan and make three full, on-time consecutive payments or agree to make payments on an income-driven plan to get your loans out of default. Consolidation is a quicker option than loan rehabilitation, but has one downside: The default will remain on your credit report for up to seven years.

4. Settle your student loans in default: If you can get a student loan settlement, your loan holder could waive some or all of your debt, but it’s an option only after you’ve exhausted consolidation or rehabilitation. You’ll have to prove:

• You rehabilitated the loan once before and then defaulted again.
• You can’t afford to repay the loan (and provide documentation).
• Your loan holder can’t find a way to collect the debt, such as if you’ve moved out of the country.

Once your loans are no longer in default, you’ll be eligible to receive financial aid. Submit a new Free Application for Federal Student Aid, or FAFSA, in order to access federal aid, including loans.

What if I want to go back to school with a defaulted private loan?

Defaulting on a private student loan won’t disqualify you from receiving federal student aid. But it’s not a good idea to take on more debt with a loan in active default. It’ll happen after 90 days of missed payments, according to the Consumer Financial Protection Bureau.

Private lenders are also unlikely to approve you for a new student loan or refinanced student loan if you have a loan in default.

Not all private lenders offer options to get out of default without paying the loan in full or going to court. To get a private loan out of default, your options beyond making a full payment are going to be expensive:

Pursue student loan settlement: Settling your debt is the last resort for federal student loans, but for private loans, it’s neck and neck with pursuing bankruptcy. You’ll have to pay to hire an attorney or a debt settlement company to settle the loans for you, and it would be up to your lender to accept. You’ll have to prove why you can’t make payments on the loan now or in the future, and you’ll need a strong legal defense.

Attempt student loan bankruptcy: Discharging your student loan debt in bankruptcy is nearly impossible for federal student loans due to a requirement to prove the debt causes an undue hardship. Since federal student loans have safety nets in place, like income-driven repayment plans, it’s difficult to make a case for undue hardship. But it’s possible to discharge your private student loans. You’ll still need to prove undue hardship, and you’ll need to pay a lawyer to represent you, which can be costly.

How to defer student loans when going back to school

If you go back to school, do your student loan payments stop? If you have federal student loans, the answer is usually yes.

You can typically postpone payments on your federal student loans through deferment, as long as you’re enrolled at least half-time in an eligible program.

This deferment can last the entire time you meet this enrollment requirement. So even if you’re in an eight-year Ph.D. program, you can defer your student loan payments all eight years.

In most cases, your loan servicer will automatically place your loans into deferment when you go to school. If it doesn’t, contact your school so it can confirm your enrollment with your loan servicer.

Pros of deferring student loans

Figuring out how to defer student loans when going back to school can remove the stress of having to make student loan payments while you’re working toward your degree. With deferment, you can pause payments completely. Plus, as mentioned above, most loan servicers will automatically defer your loans, so you won’t need to be concerned about a complicated application process.

Another benefit of deferment has to do with subsidized interest. If you have any subsidized federal loans or a Perkins loan, you won’t have to worry about interest accruing during deferment — note, however, that interest will continue to accrue on your unsubsidized student loans.

Cons of deferring student loans

Even if interest isn’t accruing on your student loans, you won’t be making any progress toward repayment. Nor will this period of deferment count toward a forgiveness program, such as Public Service Loan Forgiveness.

In addition, a significant amount of interest could accrue on your unsubsidized loans, and this interest will be capitalized — added on to your principal balance — when your deferment ends.

Suppose, for example, your student loan balance is $25,000 at 5.25% interest over a 10-year repayment period and you defer payments for 12 months. When the deferment period ends, your new balance will be $1,312 higher.

You can run the numbers on your own loans with our deferment calculator here:

STUDENT LOAN DEFERMENT CALCULATOR

Loan info

Deferment length

RateRate tooltip

BalanceBalance tooltip

Term

Balance

Monthly

	BEFORE	AFTER	SAVINGS
Balance	$35,000	$36,995	-$1,995
Monthly	$383	$405	-$22/mo

By deferring a $35,000 loan (or loans) at an average interest rate of 5.7% for 12 months, your new balance would be $36,995. This is a difference of $1,995.

TotalPayments

MonthlyPayments

BEFORE

$35,000

06/2032

AFTER

$36,995

06/2033$0$9K$18K$28K$37K

One way around this problem is to make interest-only payments on your loan while you’re in school. If you can afford to make them, these small payments could save you a significant amount of money in the long term.

How to refinance student loans while in school

Now you know how to defer federal student loans when going back to school, but you might be wondering what to do with your private student loans. Unfortunately, private student loans are not eligible for federal deferment. Some private lenders will let you pause payments, but this varies by lender.

Another option to consider is refinancing your private student loans. When you refinance, you might be able to get a lower interest rate. Plus, you can choose new repayment terms, so if you need to lower payments while in school, you could opt for a long term of 15 or 20 years.

Note that choosing a longer term will result in higher interest costs over the years — that said, you can always make extra payments to pay off your loan faster after you graduate and start making more money.

You can shop around for student loan refinancing offers to find the best option for you. With some lenders, you can find out what interest rates and terms you’re likely to get without having to undergo a hard credit check — meaning that your credit score won’t be affected until you formally apply for the loan on offer.

As you compare refinancing offers, note whether the rates quoted are variable or fixed. Fixed loans keep the same interest rate for the whole term; however, with a variable loan, you could see your interest rates climb based on the financial market.

Think twice before sacrificing federal student loan benefits

It’s also possible to refinance federal student loans, but doing so involves one very big disadvantage: You’ll lose access to federal benefits.

When federal student loans are refinanced, they become private and lose eligibility for federal repayment benefits such as deferment, income-driven repayment plans and federal forgiveness programs.

Consider, for example, whether you might ever need income-driven repayment — which caps your monthly payment at 10% to 20% of your discretionary income. If you don’t expect your graduate or professional degree to result in a comfortable salary, or have some other reason to worry about being able to make you student loan payments, refinancing your federal loans could be risky.

Final thoughts on going back to school with student loans

As you can see, your approach to student loan planning will likely be different depending on whether you have federal or private student loans. Plus, there are both pros and cons to both student loan deferment and refinancing.

Deferment is a common move for graduate students, since it pauses student loan payments completely. But be careful not to let your balance balloon too much, or you could be facing an unaffordable amount of debt following graduation.

If you have strong credit (or a creditworthy cosigner), it could be worth exploring refinancing options, at least for your private student loans. But before you sign for a new loan, make sure you fully understand the possible consequences.

Think about your timeline for paying off your debt. Will lower interest rates help you pay off your debt more quickly? Or are you seeking to lower your monthly payments, even if you stay in debt longer?

At the end of the day, refinancing can save you money, though it’s not right for everyone. If you’re still unsure, here are some questions to ask yourself as you decide on whether to refinance student loans when going back to school.