A:

A student loan deferral lets you postpone making payments on your student loan for a period of time. Your lender may approve your deferral request under a number of circumstances, including but not limited to temporary total disability, public service (e.g., the Peace Corps or the Armed Forces), parental leave (e.g., pregnancy or caring for a newly adopted or newborn child), medical school residency, full-time graduate fellowship, teaching in a designated teacher shortage area, unemployment, and full-time or at least half-time enrollment at an eligible school.

Your credit score reflects whether you are meeting your obligations to your creditors. You might think that since you aren’t making any loan payments during a deferral period, you’re hurting your credit score. This is not the case. Since your lender has chosen to let you not make loan payments, you are holding up your end of the agreement with your lender and deferral will not hurt your credit score.

There are a couple of ways that deferral can indirectly hurt your credit score, however:

By waiting too long to request a deferral Don’t wait until you’ve fallen behind on your payments to request a deferral. As soon as you fall behind by more than 30 days, your lender can report your late payment to the credit bureaus, which can lower your credit score.

By not paying down your loan balance during the deferral period, your credit score might be slightly lower than it otherwise would be since the total amount you owe compared with the amount you originally borrowed affects your credit score, and the less you owe, the better. In addition, if you have an unsubsidized loan, interest will continue to accrue during the deferral period, and this increase in your loan balance could ding your credit score. If your credit score is lower than it otherwise might be because you owe such a large balance on your student loans, it should start creeping up once you start repaying your loan.

In summary, a student loan deferral does not affect your credit score. However, there are situations where your credit score would be better off if you would actually opt to not take a deferral. Everybody's situation is different and opting for taking a student loan deferral might be an optimal strategy for some but not for others.

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