Deferring PLUS Loans
Dear Betsy,
My wife has taken out 2 PLUS Loans for our son’s college education. We have been making payments on them, but we are thinking about deferment, as our son is still in school. Does a deferred loan negatively affect your credit score? I read something that seemed to imply it might actually help it by reducing your debt-to-income ratio. I just want to understand the process. Please help!
Thanks,
Curtis
Dear Curtis,
If your wife has good credit, a deferment will help keep it that way—however, a deferment will not improve her credit score. Deferment is a temporary postponement of a federal student loan. Interest continues to accrue on deferred PLUS and unsubsidized Stafford Loans, but it does not accrue for subsidized Stafford Loans.
To find out if you are eligible and to apply for a deferment, you can contact the student loan holder (the company that you send your payments to). Eligibility for deferment varies and can include enrollment in school at least half time, unemployment, and overall economic hardship, as well as certain other conditions.
If your wife’s PLUS Loans were disbursed on or after July 1, 2008, and your son is in school at least half time as defined by the school, then she should be able to defer payment. If not, she can only defer payment if she herself is enrolled in school at least half time. Another option to consider is a lower payment plan that would satisfy at least the monthly interest accrual while your son is in school. The loan holder should also be able to provide you with information about lower payment options. If you have further questions, please do write to me again.
Regards,
Betsy
