Deferment Period

DEFINITION of 'Deferment Period'

1. A time during which a borrower does not have to pay interest or repay the principal on a loan. Deferment is common with student loans, and may be granted while the student is still in school or just after graduation when the student has few resources to repay the loan. Deferment may also be granted at the lender's discretion during other periods of financial hardship to provide temporary relief from debt payments and an alternative to default.


2. The period after the issue of a callable security during which it cannot be called by the issuer.




BREAKING DOWN 'Deferment Period'

1. During a loan's deferment period, interest may or may not accrue. Borrowers should check their loan terms to determine whether a loan deferment means they will owe more interest than if they did not defer the payment. With student loans being federal loans, they do not accrue interest during the deferment period, but private loans typically do.


2. Different types of securities will have a call option allowing the issuer to buy them back at a predetermined price. The issuer cannot call the security back during the deferment period, which is uniformly predetermined by the underwriter and the issuer at the time of issuance.


For example, European options have a deferment period for the life of the option - they can be called only on expiry. Most municipal bonds are callable and have a deferment period of 10 years.

RELATED TERMS
  1. Education Loan

    Money borrowed to finance education or school related expenses. ...
  2. Deferred Interest

    The amount of interest that is added to the principal balance ...
  3. Bow Tie Loan

    A short-term, variable-rate loan in which unpaid interest charges ...
  4. Deferred Option Month

    The latter month or months of an option or futures contract. ...
  5. Deferred Month

    The latter month(s) of an option or futures contract. For example, ...
  6. Perkins Loan

    A loan program that provides low-interest student loans to undergraduate ...
Related Articles
  1. Credit & Loans

    Student Loans: Repayment During Financial Hardship

    When you think about the length of time it will take you to pay off your loans, panic might set in when you realize you might not always be able to afford your payments. Thankfully, the federal ...
  2. Credit & Loans

    What to Do When You Can't Repay Your Student Loans

    Student loans should be kept in good standing no matter what. Here are some tips on managing your loans.
  3. Credit & Loans

    10 Ways to Manage Student Loan Debt

    How to manage those pesky payments as you embark on adult life.
  4. Credit & Loans

    Don’t Fail Student Loan Debt 101

    Don't be a statistic! According to a recent study, six in 10 Millennials don’t know what they owe or what to do with student loans after they graduate.
  5. Professionals

    Types of Financial Aid and College Loans

    Types of Financial Aid and College Loans
  6. Fundamental Analysis

    Student Loan Asset-Backed Securities: Safe or Subprime?

    Similar to the mortgage-backed securities that caused the 2008 recession, student loan asset-backed securities could lead to the next financial crisis.
  7. Savings

    A Beginner's Guide to Getting Student Loans

    Follow these 5 steps and you'll be well on your way to knowing which loans to go after – and which college really offers you the best deal.
  8. Credit & Loans

    College Loans: Private vs. Federal

    Not all student loans are the same. Know what you're getting into before signing on the dotted line.
  9. Credit & Loans

    Top Student Loan Providers

    Many banks and institutions offer student loans, but some offer better deals than others. Read this list of top student loan providers before you borrow.
  10. Credit & Loans

    Student Loans: Conclusion

    Let's recap what we've learned about student loans: How to pay for college is as complicated and as important a decision as which college to choose, what to major in and whether to live ...
RELATED FAQS
  1. What's the difference between a grace period and a deferment?

    Learn the difference between grace periods and deferments and when each type of delayed-payment period applies to various ... Read Answer >>
  2. When capitalizing interest, will interest accrue while you are in a deferment?

    Learn what capitalized interest is. Understand why interest accrues while a person is in a deferment, based on capitalized ... Read Answer >>
  3. How does accrued interest work on student loans?

    Learn how student loan borrowers are affected by accrued interest on outstanding loans balances while in deferment and during ... Read Answer >>
  4. Why are private student loans generally more expensive than federal loans?

    Make the right decision between a federal student loan and a private student loan when looking for financial aid for your ... Read Answer >>
  5. What are the pros and cons of consolidating my student loans?

    Read about the possible advantages and disadvantages of consolidating your student loan debts, and find out how to determine ... Read Answer >>
  6. Why is more interest paid over the life of a loan when it is capitalized?

    Learn what it means to capitalize interest on a loan. Understand why more interest is paid over the life of a loan when it ... Read Answer >>
Hot Definitions
  1. Yield Curve

    A line that plots the interest rates, at a set point in time, of bonds having equal credit quality, but differing maturity ...
  2. Stop-Limit Order

    An order placed with a broker that combines the features of stop order with those of a limit order. A stop-limit order will ...
  3. Keynesian Economics

    An economic theory of total spending in the economy and its effects on output and inflation. Keynesian economics was developed ...
  4. Society for Worldwide Interbank Financial Telecommunications ...

    A member-owned cooperative that provides safe and secure financial transactions for its members. Established in 1973, the ...
  5. Generally Accepted Accounting Principles - GAAP

    The common set of accounting principles, standards and procedures that companies use to compile their financial statements. ...
  6. DuPont Analysis

    A method of performance measurement that was started by the DuPont Corporation in the 1920s. With this method, assets are ...
Trading Center