Will Getting a Student Loan Deferral Hurt My Credit Score?

A student loan deferral by itself does not affect your credit score, however, in certain situations, your credit score would be better off if you avoided it. Learn how student loan deferrals work and how they can affect your credit score.

How Does Deferring Student Loans Affect My Credit?

A student loan deferral or deferment lets you postpone making payments on your debt—the principal, the interest, or both—for a period of time. Your lender may approve your deferral request under a number of circumstances.

Usually, these circumstances involve your inability to work: temporary total disability, rehabilitation training program, parental leave (e.g., pregnancy or caring for a newly adopted or newborn child), or unemployment. Or, they might reflect additional study: medical-school residency, full-time graduate fellowship, or at least half-time enrollment at an eligible school. Deferrals are also allowed for certain types of jobs: public service (e.g., joining the Peace Corps or the Armed Forces), or teaching in a designated area or school system that has a shortage of teachers.

Your credit score reflects whether you are meeting your obligations to your creditors. Usually, non-payment is a prime example of not meeting obligations. But student loan deferments are a different case. You're not just opting out on your own: Your lender has approved the request to suspend your repayments. So, you are holding up your end of the agreement with your lender. Hence, the deferral will not directly hurt your credit score.

Drawbacks of Student Loan Deferrals

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

Waiting Too Long

Don't wait until you've fallen behind on payments to request a deferral. As soon as you're 30 days overdue, your lender can report your payment as "late" to the credit bureaus, which can lower your credit score.

When your loan payment is 90 days overdue, it is officially "delinquent." When your payment is 270 days late, it is officially “in default.” Both delinquencies and defaults have significant negative consequences on your score. Deferrals won't directly affect your credit score.

More Debt

Not paying down your loan balance during the deferral period could cause your credit score to sink slightly lower over time.

The total amount you owe compared with the amount you originally borrowed affects your credit score, and the less you owe, the better. In this case, your debt is not growing, but it is getting older, and sometimes its age weighs more heavily on the score.

In addition, if you have a private loan or a federal unsubsidized loan, interest will continue to accrue during the deferral period, and this increase in your loan balance, which could drag on your credit score. If you don’t pay the interest on your loan and allow it to accrue, the total amount you repay over the life of your loan may be higher.

On the positive side, 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 increasing once you start repayments again.

The Bottom Line

A student loan deferral doesn't directly hurt your credit score. However, it doesn't help it, either. Depending on your situation, a loan deferral might not be the optimal strategy for dealing with your student debt. Before you commit to this course, consider alternative options such as refinancing or income-driven repayment plans.