If you find yourself in a situation where you have trouble repaying your student loan(s), you might qualify for a deferment, forbearance, or other form of payment relief.
For instance, you may be able to get a deferment if you can prove economic hardship, are returning to school, are unemployed, or looking for a job.
A deferment means you are not required to make payments on your loan during the approved deferment period. In other words, the payments can be postponed until a better time.
Forbearance is another way to put off student loan repayments for a few months due to temporary setbacks like illness, financial hardship or when you’re unable to qualify for a deferment.
During a period of deferment, the interest does not accrue on your subsidized loans. However, you are responsible for paying the daily interest that accrues on all your unsubsidized student loans. And unless you pay the interest as it accrues, you are more likely to owe even more after the deferment than before.
In the case of loan forbearance, interest continues to accrue on both subsidized and unsubsidized loans.
Deferment of Student Loans
Examples of deferment options available for federal student loans are
- In-School Deferment;
To qualify for an in-school deferment, you must be enrolled at least half time in an eligible institution during which payments on the loan will be deferred until after you cease to be enrolled half-time.
- Unemployment Deferment;
If you’re working less than 30 hours per week and able to prove that you’re actively seeking full-time employment, you may apply for unemployment deferment for up to 3 years.
Each deferment will go in 6-month cycles. However, this is never automatically put in place – you must reapply for deferment after each 6 months.
- Economic Hardship Deferment;
This type of deferment is available to borrowers during times of financial difficulty where the borrower is working full-time but the monthly gross income is no more than 150% of the poverty level based on the immediate family size.
To check your eligibility, use this calculator to determine whether you qualify for an economic hardship deferment.
Recipients of federal or state public assistance benefits – TANF, SSI, Food Stamps, or state public assistance, are “automatically” qualified for hardship deferment.
- Military Service Deferment.
You may be eligible for military deferment, if you’re called to active duty during a war or other military operation or national emergency, but not including training or attendance at a military school.
This deferment will postpone your payments while you fulfill your military obligations, which usually ends 180 days after demobilization.
A loan deferment program also applies to mothers re-entering the workforce, or those on parental leave from work as well as students that are in the Armed Forces, Peace Corps, volunteers, or in public health service.
Remember, a deferment does not eliminate the requirement for you to pay back your student loans, it simply delays your payments temporarily. So it’s wise to explore other options first before deferring your student loans.
If you can manage small payments, you should consider choosing Income-Based Repayment instead of deferment. These payments can be as low as $0 for some borrowers.