hardship deferment
A postponement of debt payments granted due to documented financial hardship — interest typically continues to accrue.
Example
“The hardship deferment paused student loan payments for 12 months while she rebuilt her income.”
Memory Tip
DEFERMENT — payments paused, not cancelled. Interest keeps running.
Why It Matters
Hardship deferment can provide critical temporary relief when facing unexpected financial crises, allowing you to pause payments without defaulting on your debt. However, understanding that interest continues to accrue means your total debt burden actually grows during the deferment period, making it important to have a plan for resuming payments.
Common Misconception
Many people believe that hardship deferment means their debt is forgiven or that interest stops accumulating during the pause. In reality, deferment only delays your obligation to make payments while interest continues to compound, meaning you will owe more money when payments resume.
In Practice
Suppose you have a student loan balance of $25,000 with a 6 percent annual interest rate and you receive a hardship deferment for 12 months due to job loss. While you make no monthly payments during this year, approximately $1,500 in interest accrues, increasing your total debt to $26,500 when your deferment period ends and regular payments resume.
Etymology
From Latin 'differre' meaning to delay — delaying payment due to hardship.
Common Misspellings
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