A loan deferment is a period of time where no payments are required and interest is accruing. A deferment will extend the term of your loan by the number of months of the deferment period. For example, a 3-month deferment would extend your loan for 3 months past its original final payment date. When we offer a COVID-related deferment on the accounts we service, we add the number of payments deferred to the end of the loan, so you’ll make the same number of total payments (e.g., 60 payments on a 5-year loan).

You have a “simple interest” loan. This means that interest is assessed every day. To calculate how much interest is assessed each day, you can multiply your principal balance by your loan’s interest rate and then divide by 366 (because it is a leap year). To see how much interest built up while your payment was deferred, multiply that daily interest amount by the number of calendar days since your last payment.

Even though no payments are required during a deferment period, interest continues to build up during this time. When your deferment period ends and you resume monthly payments, your payments will first be allocated to offset your total interest that has accumulated during the deferment period. Once the interest is paid, the remaining payment will be applied to principal.

Your loan’s final payment date will be pushed back by the number of months that your payments were deferred. For example, if your final payment was scheduled to be June 2021 and you took a 3-month deferment, the new final payment date will be pushed back 3 months, to September 2021. You will still make the same number of monthly payments that you requested at the start of your loan. You can always prepay your loan at any time without penalty.

As you resume payments on your loan, the monthly payment amount will not change and the accumulated interest will be paid first. It will likely require a few payments before the accumulated interest is paid down.

Because your first few post-deferment payments will be allocated to pay off accumulated interest, your principal balance will not come down as quickly as anticipated at the start of your loan. This means that your final payment will be higher than your typical monthly payment to cover the remaining principal. To avoid a higher final payment, consider paying a little extra each month when your budget allows or paying early whenever possible. The sooner you make loan payments, the faster your balance comes down and the less interest will accumulate. You can always pay off your loan early without penalty.

If you were forced to choose between defaulting on your loan or taking a deferment, you made a good choice! Deferments should only be used when needed because they are likely to result in more interest charges. When your payment was calculated at the start of your loan, it was based on making equal payments every month. Because you needed to stop those payments for a few months, the balance did not come down as quickly as had been anticipated at the start of your loan. You pay interest on that higher balance.

Although months will be added to the end of your loan to cover your deferred payments, your final payment will likely be higher, unless you pay more than your scheduled payment when you can along the way.

By paying a little extra when you can – during or after your COVID deferment – you will reduce the amount of the final payment, while simultaneously lowering the amount of interest you owe. Consider rounding up your payment each month or dedicating a portion of a bonus or tax refund to reduce your balance.

Yes, we are required to report your account accurately to the credit bureaus. We report the deferred payment as a part of our monthly reporting process and code the account as ‘impacted by a natural or declared disaster.’

If you borrowed $20,000 at an 11% interest rate for 5 years, your monthly payment would be $434.85 for 60 months. If you needed to take a 3-month COVID-related deferment, starting in the 11th month of your loan, this is what you could expect:

• Your monthly payment amount after deferment would remain $434.85.
• Your final payment date would be pushed out by 3 months beyond the original date.
• Your first monthly payment after deferment would go towards paying off the interest that accumulated while your loan was deferred. There is no reduction to your principal during this time.
• After you make all of your remaining payments within your term, assuming you pay $434.85 on your due date, you would owe a final payment of about $1,180 (about $745 higher than usual).
• The following factors influence the size of the final payment:
  • The length of your deferment
  • How far into your loan you were when your deferment started (the earlier in your loan, the higher the final payment as a result of the fact you pay more in interest upfront versus towards the end of your loan term)
  • Your interest rate
  • Your loan balance at the start of your deferment
  • The timing of your payments (paying before your monthly due date reduces the amount; paying after your monthly due date increases it)
  • The amount you decide to pay each month (paying a little extra when you can will reduce the amount of the final payment, although you are not required to do this)
• Remember, you can prepay your account at any time without penalty.

Using the above example, here is what you could expect if you took two 3-month extensions:

• Your monthly payment amount after deferment would remain $434.85.
• Your final payment date would be pushed out by 6 months beyond the original date.
• Your first three monthly payments after deferment would go towards paying off the interest that accumulated while your loan was deferred. There is no reduction to your principal during this time.
• After you make all of your remaining payments within your term, assuming you pay $434.85 on your due date, you would owe a final payment of about $1,910 (about $1,475 higher than usual).

If you borrowed $33,000 at a 6.7% interest rate for 6 years, your monthly payment would be $557.88 for 72 months. If you needed to take a 3-month COVID-related deferment, starting in the 26th month of your loan, this is what you could expect:

• Your monthly payment amount after deferment would remain $557.88.
• Your final payment date would be pushed out by 3 months beyond the original date.
• Nearly all of your first monthly payment after deferment would go towards paying off the interest that accumulated while your loan was deferred. There is very little reduction to your principal balance in this month.
• After you make all of your remaining payments within your term, assuming you pay $557.88 on your due date, you would owe a final payment of about $1,055 (about $500 higher than usual).
• The following factors influence the size of the final payment:
  • The length of your deferment
  • How far into your loan you were when your deferment started (the earlier in your loan, the higher the final payment as a result of the fact you pay more in interest upfront versus towards the end of your loan term)
  • Your interest rate
  • Your loan balance at the start of your deferment
  • The timing of your payments (paying before your monthly due date reduces the amount; paying after your monthly due date increases it)
  • The amount you decide to pay each month (paying a little extra when you can will reduce the amount of the final payment, although you are not required to do this)
• Remember, you can prepay your account at any time without penalty.

Using the above example, here is what you could expect if you took two 3-month extensions:

• Your monthly payment amount after deferment would remain $557.88.
• Your final payment date would be pushed out by 6 months beyond the original date.
• Nearly all of the first two monthly payments after deferment would go towards paying off the interest that accumulated while your loan was deferred. There is no reduction to your principal during the first month, and very little in the second month.
• After you make all of your remaining payments within your term, assuming you pay $557.88 on your due date, you would owe a final payment of about $1,550 (about $990 higher than usual).