What is student loan deferment?

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Student loan deferment allows you to temporarily reduce or postpone your payments for a period of time. If you’re struggling to make your payments, a student loan deferment could give you temporary relief. However, there are some downsides to consider. With payments stalled, you won’t be making any progress toward paying off your loans, and interest can still accrue — so a deferment plan is not a long-term solution. Read on to learn more about how to qualify for deferment and what to consider before applying.

How do you qualify for student loan deferment?

If personal circumstances make timely payments difficult, a loan deferment could be what you need to get started. If you have a private student loan, eligibility depends on your lender, so you’ll have to contact it to see what your options are. However, there are also several federal student loan deferment programs; if you have a federal loan and you fit into any of these categories, you may be able to qualify.

In school

If you’re attending college, any federal loans may automatically fall into deferment. Here’s what you need to know:

  • You need to be enrolled in an eligible college, career school or university for at least half time to qualify.
  • Your interest may continue to accrue, depending on your loan. If you have a subsidized federal student loan or a Perkins loan, interest will not accrue.
  • If you have a Direct PLUS Loan, you’ll receive an additional six months of loan deferment after you cease your school enrollment. However, Direct PLUS Loans do carry higher interest rates and origination fees than subsidized and unsubsidized loans.

Graduate fellowship or residency program

When applying for a deferment while attending a graduate fellowship program, you must meet the following criteria:

  • The fellowship must be an approved program.
  • You must attend on a full-time basis.
  • The program must provide sufficient financial support to allow for full-time study for a period of at least six months.

Military service or post-active duty

If you are currently serving in the military, here are a few things you should consider before applying for a deferment:

  • You may be eligible if you are on active-duty military service in connection in war, military operation or national emergency.
  • You also may be eligible if you’ve completed qualifying service and an applicable grace period.
  • The deferment ends when you resume schooling for at least half time with an approved university, college or career school, or 13 months following the completion of your active-duty service.

Parent PLUS borrower

If your child is currently enrolled in school with a Direct PLUS loan, you may be able to receive a deferment.

  • You may qualify if you received a Direct PLUS loan and you’re the parent or legal guardian of a student enrolled at an approved university for at least half time.
  • You also may be able to receive an additional six months after the student ceases to be enrolled in school half time.
  • Check with your child’s school to see if you can submit the parent PLUS deferment request when you submit the Direct PLUS loan request.

Cancer treatment

Here’s what you need to know about qualifying for cancer treatment deferment:

  • If you are undergoing cancer treatment, you may be eligible for this deferment.
  • You are also eligible for six months after your treatment ends.

Economic hardship

Economic hardship can hit anyone at any time, and deferment may be a good way to find temporary relief. You may qualify for economic hardship deferment if you:

  • Are currently working full time but your earnings are below 150 percent of the poverty guideline for your specific state of residence or family size.
  • Are currently serving in the Peace Corps.
  • Are currently receiving welfare or another means-tested benefit.

The maximum deferment period is three years for economic hardship.

Unemployment

If you are currently unemployed, you may be eligible for unemployment deferment if:

  • You receive unemployment benefits.
  • You’re seeking full-time employment but unable to find work.

Borrowers may apply for a maximum of three years of deferment with this program.

Rehabilitation training

Here’s what you need to know about rehabilitation training deferment before applying:

  • The rehabilitation training program you’re enrolled in must be licensed, approved, certified or recognized by the Department of Veterans Affairs or a state agency.
  • The program must be designed to provide vocational, drug abuse, mental health or alcohol abuse rehabilitation treatment.
  • The program must require “substantial commitment” by you to your rehabilitation — meaning it may prevent you from being employed 30 or more hours per week in a position expected to last at least three months.

How to apply for student loan deferment

Few student loan deferments are automatic. Each type of federal deferment has its own deferment request form, which you’ll have to provide to your loan servicer. You’ll also have to provide documentation proving your eligibility. For example, if you are applying for a graduate fellowship loan deferment, you may need to provide documentation proving that your fellowship is an approved program.

One of the few exceptions to this is if you are currently enrolled in an undergraduate program with federal loans. If you are enrolled in a college, university or career school for at least half time, your student loans could be deferred automatically, based on your enrollment information. If you are unsure if your student loans have been deferred, you can contact your school or your loan servicer.

Keep in mind that this is only the case with federal loans, not private loans. If you would like to apply for deferment with a private lender, you’ll have to contact your lender and ask about your options; some do offer deferment, but the terms may be more limited.

Things to consider when applying for student loan deferment

Student loan deferment is a temporary solution. When you defer a loan, you aren’t making any progress toward paying off your existing student loans, and interest still can accrue.

Interest accrues on:

  • Direct Unsubsidized Loans.
  • Unsubsidized Federal Stafford Loans.
  • Direct PLUS Loans.
  • Federal Family Education (FFEL) Loans.
  • Unsubsidized portion of Direct Consolidation Loans.
  • Unsubsidized portion of FEEL Consolidation Loans.

Interest does not accrue on:

  • Direct Subsidized Loans.
  • Subsidized Federal Stafford Loans.
  • Federal Perkins Loans.
  • Subsidized portion of Direct Consolidation Loans.
  • Subsidized portion of FFEL Consolidation Loans.

When thinking about deferring any student loans, it’s crucial to have a solid financial plan in place. It’s always a good idea to speak with a financial adviser before making a decision.

When applying for a private student loan deferment, it’s also important to consider your lender’s specific deferment options to see if they make sense for your situation. Because eligibility requirements and terms vary by lender, your options may be more narrow. Some may require you to re-apply every few months, and some may capitalize interest during your deferment period.

Student loan deferment vs. forbearance

Student loan deferment and forbearance can both temporarily postpone your student loan payments. However, there are some differences between the two options.

With loan forbearance, you can temporarily reduce or halt your loan payments, as with a deferment. However, with a forbearance, you will be responsible for paying all of the interest that accrues, while with a deferment, interest rates on some federal loans may be waived.

A forbearance may be a good option if you did not originally get approved for a deferment. Due to the fact that interest will accrue, a forbearance can be the less desirable choice. If you are interested, you can request a forbearance from your loan provider, but there are some differences you should consider before applying.

Differences between a student loan deferment and a forbearance

Deferment Forbearance
Purpose Postpone loan payment Postpone loan payment
Impact on credit None None
Interest accrual None on Perkins and Subsidized Federal Loans Yes
Approval process Submit the applicable federal deferment request or contact your servicer Submit a forbearance request or contact your servicer
Eligibility requirements Varies by deferment type (e.g., in school, unemployed, on active duty) Varies by forbearance type (general or mandatory)
Length Varies by deferment type, but typically a maximum of three years for federal programs No more than 12 months at a time for federal programs

What to do if you can’t pay or defer your student loans

If you don’t qualify for student loan deferment, forbearance may be the next best option. However, applying for income-driven repayment can also be worthwhile.

Income-driven repayment plans are offered by the federal government and can potentially lower your student loan payments based on your monthly income. There are four plans offered:

  1. Revised Pay As You Earn Repayment Plan (REPAYE Plan).
  2. Pay As You Earn Repayment Plan (PAYE Plan).
  3. Income-Based Repayment Plan (IBR Plan).
  4. Income-Contingent Repayment Plan (ICR Plan).

To apply, you’ll need to submit an income-driven repayment request. You can get the application from your loan servicer after discussing which plan will benefit you the most.

However, if an income-driven repayment plan doesn’t seem like the best option for you, there are other options for paying off your student loans:

  • Refinancing. Refinancing your existing loans could be a viable option if you see a good interest rate and you meet the lender’s eligibility criteria. Just remember that if you refinance your federal loans with a private lender, you’ll lose out on federal benefits.
  • Consolidating. Consolidating multiple loans may also be a good choice for you if you’re in debt and need more time to pay off your loans. If you consolidate federal loans, you won’t receive a better interest rate, but you can lower monthly payments by extending your repayment term.
  • Public Student Loan Forgiveness. PSLF is a long-term option for paying down federal student loan debt. If you’re employed by a government organization or a not-for-profit organization, you may be eligible for this program, which forgives the remaining balance on your Direct Loans after 120 consecutive monthly payments.

To determine which repayment plan or method is best for you, it’s best to speak with a financial adviser or loan servicer. You can also calculate how long it will take to pay off your student loans and figure out how to budget with a student loans calculator.

Featured image by Dean Drobot of Shutterstock.

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