Your student has just enrolled and is excited to take the next step in advancing their career — additionally, they may have taken out a student loan in order to pay the tuition. If the latter is the case, one thing they’ll definitely want to be aware of is whether or not payments are deferred, and what that deferral period entails. At Climb, our loans may have either no deferment, interest-only deferment, or full deferment. How do these deferral periods differ, and what impact would they have on your students’ loans? Below, we’ve got an explainer of student loan deferral options.
Full deferment
When a loan has full deferment, no payments are owed until after the student borrower finishes their program. This way, they don’t have to worry about making payments while they’re in class. However, just because no payments are due doesn’t mean every part of the loan is put on pause. Even in full deferment, interest is accruing each month and being added onto the total loan amount.
Many people don’t realize that as soon as the funds are sent, interest begins to build up, regardless of when their repayment period begins. So it can come as a shock when, if their loan is fully deferred until after they graduate, they’re faced with a much higher loan amount than they originally took out.
Interest-only deferment
IO deferment, on the other hand, involves making reduced, interest-only payments during the initial months after loan funds are disbursed — like when the student is still in school or looking for a job.
This can be beneficial for students who can’t make full payments while in class, but who want to keep interest from accruing during that period. Their overall balance will be kept down, and they won’t run the risk of being shocked by a higher loan amount than they were anticipating while transitioning from program to job search. That’s why many of our loans at Climb Credit come with an interest-only deferment option. We want to help our borrowers finish their program in the best financial position possible!
No deferment
This is a fairly straightforward option — with no deferral period, the student will start full loan payments as soon as the loan is funding, including while in their course.
This option can be good for those who want to keep the total amount paid lower. However, it also comes with the highest monthly payments while in class, so some may opt for full or interest-only deferment in order to pay less while in school.
For a full look at the differences between these deferral periods and how they’ll affect payments, check out our comparison chart below!
Deferment comparison*
| Loan amount | Interest rate | Deferral months | Full repayment months | First 10 month payments | Next 50 month payments | Total paid | APR | |
|---|---|---|---|---|---|---|---|---|
|
No deferral |
$10,000 |
10% |
|
60 |
$223.09 |
$223.09 |
$13,385.64 |
12.13% |
|
Interest-only deferral |
$10,000 |
10% |
10 |
50 |
$87.50 |
$257.64 |
$13,757.04 |
11.89% |
|
Full Deferral |
$10,000 |
10% |
10 |
50 |
$0 |
$279.11 |
$13,955.54 |
11.65% |
*Sample loans for representative purposes. Actual terms may vary based on a number of factors.
*Sample “no deferral” term includes 60 months of principal and interest payments. Terms vary by program.
*Sample “interest-only” term includes 10 months of interest-only payments followed by 50 months of principal and interest payments. Terms vary by program.
*Sample “full deferral” term includes 10 months of $0 payments followed by 50 months of principal and interest payments. Terms vary by program.
*Interest rates are fixed from 5.99%; however, actual interest rates vary within this range based on a number of factors. Interest-rate caps may be lower in some states due to legal requirements and may impact eligibility to qualify for a Climb loan.
*Annual percentage rates (“APRs”) on loans range from 0.00%–26.47%. Interest rate caps may be lower in some states due to state requirements. APRs are charged for borrowing and are expressed as a percentage that represents the actual yearly cost of funds over the term of a loan. The APR includes a 5% origination fee, where permissible.
*Loan approval subject to full underwriting. Loans are originated by Climb Investco, LLC (Registered as Climb Credit Investco, LLC in Florida). Schools do not endorse loans originated by Climb Investco, LLC and Climb Investco, LLC is not affiliated with any school. California Finance Lender #60DBO-44527. NMLS Consumer Access (NMLS# 1240013).