As of today, in 2019, we are witnessing a rising number of students borrowing loans who are finding it challenging to tackle their growing debt. This eventually leads them to consider the various other options available to facilitate postponing their payments mainly either through deferment or forbearance. On the other hand, federal student loans also offer several other repayment options to struggling borrowers to keep up with their monthly payments.
The dictionary definition of the word ‘deferment’ is the act of delaying something until a later time, or an occasion when something is delayed until a later time. Keeping that in mind, we can now have a better understanding of deferment in terms of student loans. Some of the most commonly asked questions such as eligibility, the procedures associated with deferment, and so on are answered below.
Table of contents
- Meaning of student loan deferment
- Types of student loan deferment
- Eligibility for student loan deferment
- Difference between deferment and forbearance
- Student loan deferment v/s Income-driven repayment
- Make a decision
What is the meaning of Student Loan Deferment?
Student loan deferment is an agreement between the student and lender that temporarily allows the student to reduce or postpone repayment of a student loan for a designated period.
In simple words, if the student is experiencing financial hardship or is unemployed, he or she may be eligible for deferment. Further on, we will discuss the qualification and eligibility criteria for deferment.
Types of student loan deferment
There are certain types of student loan deferment available for borrowers-
1-In-school student deferment
This is an automatic deferment offered and it comes with the requirement that you are attending school at least half-time and if you have subsidized or unsubsidized loans or if you are a graduate or professional student with Direct or FFEL PLUS loan , your loan will remain on pause until six months after you graduate or leave school.
2- In school parent deferment
If you are a parent who took out a Direct PLUS or FFEL PLUS loan for helping your son/daughter for financial help, the student must be enrolled at least half-time. Parents are eligible as well for deferment, but you have to request for it. In this, your deferment comes with the same six-month grace period afforded students.
3- Unemployment deferment
In the unemployment deferment, you may request to defer for up to three years if you become unemployed or unable to find a full-time job. To qualify this deferment you must be either receiving unemployment benefits or seeking full-time work by registering with an employment agency and in this, you have to reapply every six months for this deferment.
4-Economic hardship deferment
If your income is less than 150% of your state’s poverty guidelines or if you are currently receiving state or federal assistance you can apply for this deferment which is available for up to three years. You can also reapply for this deferment once every 12 months.
5- Military deferment
If you are in military service in connection with a war, military operation, or national emergency can qualify you for student loan deferment in which you will get a 13-month grace period following the end of your service or until you return to school on at least a half-time basis.
Other options are
1- Cancer treatment deferment
2- Graduate fellowship deferment
3- Peace Corps deferment
4- Rehabilitation deferment
5- Perkins loan forgiveness deferment
Eligibility for student loan deferment
Primarily, the first thing to remember is that deferment is available for federal student loans. Federal student loans come in many forms, such as Stafford Loans and PLUS Loans.
To qualify for the same, the main criterion is that you must not be in default on your federal student loans whereas if you have private student loans, you may mostly not be eligible for either deferment or forbearance, but nevertheless, you’ll need to contact your lender for further details.
With private student loans, your deferment options are not very varied, though you may qualify if you are enrolled in school, deployed by the military or unemployed. Your private lender might also offer deferment for economic hardship. If that's the case, you'll need to explain your financial hardship circumstances and hope aide you to formulate a more affordable option for your repayment.
As per studentaid.ed.gov, you may be eligible for a deferment on your federal student loan under the following circumstances:
While you are enrolled at least half-time at an eligible college or post-secondary school, and if you received a Direct PLUS Loan or FFEL PLUS Loan as a graduate or professional student, for an additional six months after you cease to be enrolled at least half-time (In-School Deferment Request);
If you are a parent who received a Direct PLUS Loan or an FFEL PLUS Loan, while the student for whom you obtained the loan is enrolled at least half-time at an eligible college or career school, and for an additional six months after the student ceases to be enrolled at least half-time (Parent PLUS Borrower Deferment Request);
While you are enrolled in an approved graduate fellowship program (your school can guide you through the range of programs available)
While you are receiving cancer treatment and for six months following the conclusion of your treatment (known as Cancer treatment deferment request)
While you are enrolled in an approved rehabilitation training program for the disabled (known as rehabilitation training program deferment request)
While you are unemployed or unable to find full-time employment, for up to three years (known as Unemployment deferment request)
While you are experiencing economic hardship or serving in the Peace Corps, for up to three years (Economic hardship deferment request)
While you are on active duty military service in connection with a war, military operation, or national emergency (Military Service and Post-Active Duty Student Deferment Request); or
If you were on active duty military service in connection with a war, military operation, or national emergency, for the 13 month period following the conclusion of that service, or until you return to college or career school on at least a half-time basis, whichever is earlier (Military Service and Post-Active Duty Student Deferment Request).
You're on active duty with the military or have been on active duty within the past 13 months, in connection with a war, military operation, or national emergency
You're receiving treatment for cancer. (You may also receive a deferment for six months after treatment ends).
You must apply to your loan servicer to receive a deferment. Your loan servicer is the company that communicates with you about loan payments. If you don’t know how to contact your servicer, see Who Is My Student Loan Holder or Servicer?
Borrowers may be eligible for a deferment if they are
Enrolled at least half-time in an eligible postsecondary school.
Enrolled in an approved graduate program.
Disabled and enrolled in an approved rehabilitation training program.
Unemployed or unable to find full-time employment. This type of deferment is limited to three years.
Experiencing economic hardship, as defined by federal regulations. This includes receiving federal public assistance benefits (such as food stamps), or if your monthly income does not exceed the larger of the federal minimum wage rate or 150% of the poverty line income for your family size and state. This type of deferment is also limited to three years. Peace Corps service is covered by this circumstance.
Currently on active duty with the military or you have been on active duty with the military within the last 13 months.
To receive a deferment, you must apply directly to your loan servicer. For information on how to contact your loan servicer, you can check the National Student Loan Data System. Deferments are typically granted in six-month increments.
If you believe you are eligible for deferment, use our Student Loan Deferment Calculator below to calculate how much interest you will accrue by deferring your student loans. If you do not qualify for a deferment, you can apply for forbearance to discontinue or reduce amount of payments for up to 12 months.
How Long Can I Defer My Student Loans?
The length of a student loan deferment depends on what sort of deferment you're applying for as if it's supported financial hardship or unemployment, you'll only defer your federal student loans for three years so its depend upon on your analysis during determining the length of deferment that you want to go for it now or later as might you need it more in the future. If you have any unsubsidized or PLUS loans than you want to consider the interest that could be building on your student loans as in such loans, you're responsible for paying the interest that accrues even while you're in deferment. If you weren’t able to pay during deferment, the interest will capitalize at the end of your deferment period, meaning it will be added to your loan balance.
Some of the types of deferment like economic hardship deferment, that you can reapply for but your economic hardship deferment cannot exceed a total period of three years while others types of deferment won't longer satisfy the qualifying enrollment requirements, like the rehabilitation educational program deferment, which states that you simply must be enrolled in an approved educational program to continue receiving the deferment. It is advisable that do proper research and decide the appropriate option for your situation to avoid any future chaos.
Worried about your college tuition? Learn more about student loans.
Difference between Deferment and Forbearance
Both student loan forbearance and deferment help you in postponing your payments. Deferment and forbearance are very closely related terms with the main difference being that, with the option of taking deferment, you may not be responsible for paying the interest that accrues on certain types of loans during the deferment period.
When you defer payments, you postpone your monthly payments on subsidized federal loans without accruing interest. You also don’t have to pay interest on the subsidized portion of direct consolidation loans or FFEL Consolidation Loans during deferment.
If you have unsubsidized loans, a deferment allows you to postpone payments, but the interest will accrue on your loans during the deferment period. You have the choice to pay the interest during your deferment period in order to avoid having it capitalized, or added to your principal, but you are not obliged to do so. Deferment and forbearance are great options to explore to avoid missing loan payments. It is advised to have an in-depth understanding of the difference between student loan deferment and forbearance before you pick one to avoid falling into default.
During deferment, one need not be responsible to pay interest that accrues on the following loans types:
Direct subsidized loans
Subsidized Federal Stafford loans
The subsidized portion of Direct Consolidated loans
The subsidized portion of FFEL consolidation loans
Whereas during deferment, one is responsible for paying all interest that accrues on the following loan types:
Direct Unsubsidized Loans
Unsubsidized Federal Stafford Loans
Direct PLUS Loans
Federal Family Education Loan (FFEL) PLUS Loans
The unsubsidized portion of Direct Consolidation Loans
The unsubsidized portion of FFEL Consolidation Loans
When deferment ends, any unpaid interest is added to the amount that has been borrowed, and this is termed as capitalization. Your increased loan amount then generates more interest, adding to the overall cost of your loan. You can easily limit the amount to be capitalized by making interest payments during deferment.
Deferment vs. Income-driven repayment
A borrower can also enroll in an income-driven repayment plan as they offer the same immediate relief as student loan deferment with additional long term benefits.
1-Chances of paying less each month
In case you are not able to pay the loan because you don’t earn much money, your income-driven payments could be as low as $0, the same amount as pausing payments altogether. While in deferment you are excused by your lender from making payments because of uncertain circumstances and lets you make repayment over time.
The biggest advantage of deferment is not paying interest on subsidized loans. But in most of the income-driven repayment plan also waive those costs if your payments don’t cover accrued interest.
3- Earn Loan forgiveness
as in income-driven plans after 20 or 25 years of payments, these plans forgive any remaining balance on your loans so it's better to pay under an income-driven plan and be that much closer to forgiveness instead of pausing payments for three years with a student loan deferment
You can check federal student aid’s repayment estimator to calculate the short- and long-term costs to see if an income-driven repayment plan makes more sense for you than a student loan deferment.
How do I request a deferment on my student loan payments?
Most deferments are not automatic, and you will have to submit a request to your loan servicer, most often on a form. For most deferments and some types of forbearance, you must also provide your loan servicer with documentation to show that you meet the eligibility requirements for the deferment you are requesting. There are certain eligibility requirements in order to get deferment request forms.
If you are enrolled in an eligible college or career school at least half-time, in most cases your loan will be placed into a deferment automatically, and your loan servicer will notify you that the deferment has been granted. If you enroll at least half-time but do not automatically receive a deferment, you should contact the school where you are enrolled. Your school will then send information about your enrollment to your loan servicer so that your loan can be placed into deferment.
Whenever you are looking to pause your payments through deferment, even if the reason is a mandatory one, you still have to apply for it through your student loan servicer. The process is never automatic.
You may also be required to submit documentation to support your request and demonstrate that you meet the eligibility requirements. When my husband and I requested forbearance, we needed to provide documents showing that we were paying two mortgages at one time in order to prove that we were experiencing financial hardship.
Once you have submitted your request for deferment, you must continue to pay your monthly student loan payments until you hear that your request has been granted. If you fail to make payments and your deferment or forbearance request is denied, then you will be considered delinquent and will risk defaulting on your loan.
Duration of deferment
Deferment often lasts for 12-month increments and can last for a maximum of between 48 and 60 months, depending on the loan and the lender.The length of a student loan deferment depends on what type of deferment you're applying for. If you're applying for a deferment based on financial hardship or unemployment, you can only defer your federal student loans for three years.
How do I take a decision on student loan deferment?
While applying for student loan deferment or forbearance can be a viable option for many people, it may not always be the right solution for your individual situation. Here are some questions to ask yourself before making this decision.
Is my current financial situation temporary? Something like a job loss or long-term illness can undoubtedly make your financial future unpredictable. But if you’re confident you’ll get things under control within a certain time frame, then deferment or forbearance could be a good option for you.
Do I qualify for deferment or forbearance? Before making the decision to pursue either repayment option, you’ll need to make sure you meet the specific criteria required to qualify. As previously mentioned, factors such as the type of loan, your specific financial hardship, and other circumstances will be considered.
Is postponing my student loan payments an absolute must? If you can find a way to simply restructure your budget and/or adjust your current repayment schedule, it could be a much simpler way to get a handle on your student loan debt than applying for deferment or forbearance.
If you do decide to apply, understanding the differences between deferment vs. forbearance is an important part of being an informed borrower. Whether or not you are currently facing an economic hurdle, the ability to pause student loan payments is one of the biggest perks of federal student loans.
How to defer federal student loans
Deferment helps you discontinue your payment in need of financial needs. If you are still studying at school without part-time job trying to make payments you can choose this option. To apply deferment for your federal student loans, you must submit a request to your loan servicer. And you must provide financial need proof to prove your eligibility to receive a deferment.
If you are struggling to repay your loans due to a temporary circumstance, deferment or forbearance may be a good short-term solution.
If you are having trouble repaying your loans due to circumstances that may continue for an extended period, or if you are unsure when you will be able to afford to make your monthly loan payments again, a better option may be to consider changing to an income-driven repayment plan. Income-driven repayment plans base your monthly payments on your income and family size, and in some cases, your payment could be as low as $0 per month. They can also provide loan forgiveness if your loan is not repaid after 20 or 25 years.
Always contact your loan servicer immediately if you are having trouble making your student loan payments.
Make sure you know all your options so you can be ready if you ever need to take a break from making your student loan payments.