How to Calculate Student Loan Deferment Effect on Loan Payoff

Loans for most college students are necessary to pay for the ever-increasing cost of acquiring higher education. Upon graduating, people can find themselves in financial difficulty and may need to ask for a deferment. That deferment does not come without penalty. That penalty is the interest that accumulates while the loan is in deferment. Therefore, it is important to weigh the costs before taking a deferment.

Difficulty: Moderately Challenging

Instructions

Things You'll Need:

• Current balance of the student loan
• Interest rate for the student loan

1. Determine the current amount owed on the student loan. This amount is available through the lending institution or company that financed the loan.

2. Ascertain the current interest rate on the student loan. Again, this number is available through the lending institution or corporation that financed the loan.

3. Take the loan balance and multiply it by the loan interest rate. This figure is the amount of additional funds owed on the balance for each year of the deferment. Therefore, if the loan deferment is two years in length you would simply double the figure.

4. Compute the increase in the monthly payment a deferment would cause by taking the figure from Step 3 and divide it by the number of monthly payments still due on the loan. This figure assumes that the payment plan is not graduated. On graduated plans, the individual loan structure determines the monthly payment and this computation will not accurately reflect the monthly increase.

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