Many people here in NJ who cannot pay their federal student loans seek to hide from the problem by getting a deferment or forbearance. Although this can be helpful if you need to buy a short amount of time to get an administrative discharge or apply for an income based repayment plan, it can have a bad effect in the long run.

What bad effect is that?  The accrual and capitalization of interest!  What you might not know is that while you are in a deferment or forbearance, interest on the loans continues to accrue.  It then capitalizes into principal, thus making your loan balance much higher!  The only exception to this would be a subsidized Stafford loan in a deferment.  Learn more about it here!

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Steven J. Richardson
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Bankruptcy, Collections, Student Loan, DUI and Traffic Court attorney in Woodbury, NJ.