Deferment, Forbearance, or Student Debt Consolidation?

Repaying student debt is not always an easy task. Student Loans are long lasting loans and market variations along with common ups and downs on the graduated students lives can sometimes interfere with a proper and timely repayment of the loans. This can cause several troubles that can range from lowering the borrower’s credit score to worse scenarios like default and bankruptcy. Fortunately, there are means to avoid this: Deferment, Forbearance and Consolidation.It is important, however, to understand these concepts thoroughly because as any financial tool, they must be used to solve a particular problem. Otherwise you can easily use deferment of forbearance and only get to postpone a problem and even increase it or you could resort to consolidation to solve a temporary problem that could have been fixed with a simpler tool like deferment or forbearance.Deferment And Forbearance: Similarities and DifferencesDeferment is the right of the borrower to postpone the repayment of the debt. It’s a right because if you qualify by meeting the requirements, you can request a deferment and the lender is obliged to grant it. It’s a temporary suspension of the repayment program that doesn’t accumulate interests on federal loans but can accumulate interests on private loans.Forbearance is also a rescheduling of the loan repayment but it’s not a borrower’s right but a lender’s decision and choice. Usually there are some requirements that you need to meet, including a good payment history. Interests accumulate regardless of the loan type and are added to the overall debt when the repayment program restarts.Student Debt Consolidation And It’s ConsequencesStudent Debt Consolidation is a completely different concept. You take a loan to pay off one or multiple loans and thus obtain a single and lower monthly payment with better loan conditions. There is no postponing of the loan repayment you are just combining and refinancing your debt. This implies that you need to have income capacity to start repaying the new loan.Though you don’t postpone the payment of your debt, you reduce it or at least reduce the monthly payments making them more affordable. Interests are included in the monthly payments and since there is no postponing they do not accumulate. Also, the interest rate you have to pay is locked and thus, you won’t be affected by market variations as you were prior to consolidating due to variable rates.Effects Of Combining The Different ToolsUnder certain circumstances you can combine these different tools and thus obtain further benefits from them. Deferment and forbearance are hard to combine because you either are entitled to a deferment or you ask for a forbearance hoping that the lender will grant it. But consolidation and deferment or forbearance can be combined with interesting results.If you foresee problems with your debt repayment you can obtain a delay on the payment program by means of deferment and forbearance. This will gain you a good amount of time. You can use this time to prepare a good consolidation plan and do the paperwork for obtaining the loan. Immediately after the stoppage period ends, you can consolidate your debt with a new more affordable repayment program. Hopefully by then, your financial situation will let you afford the new lower monthly payments. And as a plus, your deferment and forbearance chances are renewed as you are dealing with a fresh loan.