Postpone Student Loan Payments - Avoid Default

Student loan payments are crucial as on time payments can help boost a borrowers credit score. It is advised to avoid student loan default at any cost, in order to do so you need to have an in dept understanding on student loan deferment, forbearance and all the available options that come along with it.

Updated by Namitha/Vinitha on 2nd July 2020

Student loan repayment is a crucial phase, this phase determines how well we can manage our loans which has a direct impact on our credit score. It is important to note that if we miss a payment deadline it will show up in our credit history and can affect out credibility as a borrower. It may seem impossible sometimes, to make student loan payments. You could decide to go back to grad school and your entry-level salary isn't what you expected, or a health condition prevents you from working but you have deferment and forbearance options to postpone your payments. Each option you choose has its own eligibility rules and time limits.

Table of contents

How to Avoid Default

In order to avoid student loan default, we must explore options that help us keep a clean credit history. Options a borrower should consider are mainly student loan deferment and student loan forbearance on the payments to be made. When loans (federal loans) are not paid for a certain period of time (90 days), your loans are in delinquency. Similarly, loans not paid for about 90 to 270 days, they become default student loans. Know the difference between default and delinquency.

The ED gives Student loan default statistics, where it is said that 10% of student loans are in default just within first 3 years. It is necessary, to understand how important it is to avoid student loan default as it can affect you in multiple ways. Student loan rehabilitation and student loan settlement can be options to consider in such situations.

Private student loan default penalty totally depends on your lenders, the time period and action that is taken against you regarding student loan default can differ from federal loans.

Student loan deferment

On the off chance that you are encountering money related difficulty, return to class, are jobless, or are training for deployment military help, deferring installments with deferment might be direct for you. SubsidizedStafford loans and subsidized consolidation loans won't gather extra interest, so your balance after the suspension time frame will be equivalent to when it began. In any case, for unsubsidized Stafford loans, SLS loans, PLUS loans, or unsubsidized consolidation loans, interest will gather during the delay time frame, so it's good to pay in any event the interest on your loan every month. This will keep your interest from being promoted, or added to the principal amount of your loan, basically expanding your all-out balance and expecting you to pay more during the long term.

Student Loan Forbearance

On the off chance that you work as an intern, perform any type of community administration, or end up encountering financial difficulty, you might be able to postpone installments with forbearance. All loans accumulate interest during the forbearance period, so it's savvy to pay at any rate the month to month interest during this period to maintain a strategic distance from interest capitalization.


Available Deferments

The federal government has allowed the below deferment options. Always remember just because you are eligible for a deferment does not mean you need to request if you feel you can make payments on your loan, you are encouraged to do so. Refinance default student loans also help you manage your loans with lesser interest rates.

Armed Forces Deferment

If you serve on active military duty in the Armed Forces, you may be eligible for this deferment or other student loan benefits for members of the military. To qualify for this deferment, your first Stafford or SLS loan must have been disbursed before July 1, 1993, or for parent borrowers, your PLUS loan should have been disbursed before August 15, 1983. Consolidation loans do not qualify for this deferment. Also, you must be serving on active duty in the U.S. Armed Forces during a war, military operation, or national emergency. You could also qualify if you are serving in a reserve component of the Armed Forces or the National Guard full time for at least one year or due to a national mobilization. The maximum time limit for this deferment is 36 months, inclusive of any Public Health Services and National Oceanic and Atmospheric Administration (NOAA) deferment time used.

Cancer Treatment Deferment

If you are receiving treatment for cancer, you may be eligible for this deferment. This deferment is currently only available for the account number begins with the letter “E,” but will soon be available if your account number begins with the letters “D” or “J.” To qualify for this deferment, 

  • You must have entered repayment on or before September 28, 2018, or had your loan disbursed on or after September 28, 2018.

  • your cancer treatment must not have ended before September 28, 2018.

  • The deferment will be retroactively applied to begin on the date your cancer treatment started. 

  • This deferment will be applied for up to 18 months.

Domestic Volunteer Deferment

If you are full-time, paid volunteer for an ACTION (Domestic Volunteer Service Act of 1973, VISTA, or AmeriCorps) programs for more than a year, you may defer payments. To qualify for this deferment, your first Stafford or SLS loan must have been disbursed before July 1, 1993, or for parent borrowers, your PLUS loan must have been disbursed before August 15, 1983. Consolidation loans will not qualify for this deferment. You must be a full-time, paid volunteer in an ACTION program and services for at least one year. The maximum time limit for this deferment is 36 months. 

Economic Hardship Deferment 

If you receive public assistance, serve in the Peace Corps, or make less than the minimum wage or poverty guideline, you can defer payments.

To qualify, your first loan must have been disbursed on or after July 1, 1993, and you must meet one of the following requirements:

  • You are receiving payments or benefits under a federal or state public assistance program

  • You are serving in the Peace Corps

  • You are working full-time but earning a monthly income that is less than the minimum wage rate or 150% of the poverty guideline for your family size, whichever is greater

Full-Time Teacher in a Teacher Shortage Area Deferment

You may be able to defer payments if you teach in a designated teacher shortage area.

This deferment is available to borrowers whose first Stafford or SLS loan was disbursed on or after July 1, 1987, but before July 1, 1993. PLUS and consolidation loans do not qualify for this deferment. You must be teaching full-time determined by the Chief School Administrator or the Chief State School Officer. The maximum time limit for this deferment is 36 months.

Graduate Fellowship Deferment

If you're accepted into a graduate fellowship program, you may be able to defer payments.

If you've received your undergraduate degree and are engaged in full-time study in a graduate fellowship program, you may qualify for this deferment. There is no maximum time limit for this deferment.

Internship/Residency Deferment

While working for an internship or residency program, you may apply for deferment for up to two years.

To qualify for this deferment, your first Stafford or SLS loan must have been disbursed before July 1, 1993, or for parent borrowers, your PLUS loan must have been disbursed before August 15, 1983. Consolidation loans do not qualify for this deferment. You must be accepted into either an internship/residency program that leads to a degree or certificate from an institution of higher education, hospital, or health care facility that offers postgraduate training or an internship/residency program that is required before you can begin professional practice or service. The maximum time limit for this deferment is 24 months.

Military Deferment

If you are serving on active military duty during a war or other military operation, or during a national emergency, you may apply for deferment.

This deferment is available for borrowers serving in the military on active duty or in the National Guard on qualifying duty during a war or other military operation, or during a national emergency. The service period must begin on or after October 1, 2007, or include that date. There is no maximum time limit for this deferment.

National Oceanic and Atmospheric Administration (NOAA) Deferment

If you are on NOAA active duty, you may defer payments.

This deferment is available to borrowers whose first Stafford or SLS loan was disbursed on or after July 1, 1987, but before July 1, 1993. PLUS and consolidation loans do not qualify for this deferment. You must be on active duty in the NOAA. The cumulative maximum time limit for this deferment is 36 months, inclusive of any Public Health Services and Armed Forces deferment time used.

Parental Leave Deferment

You may defer payments while pregnant or caring for a newborn or newly adopted child if you were in school within the past six months and are no longer enrolled or working full-time.

This deferment is available to borrowers whose first Stafford or SLS loan was disbursed before July 1, 1993. PLUS and consolidation loans do not qualify for this deferment. You must be pregnant or caring for a newborn or newly adopted child. Also, you must have been enrolled in school at least half-time within the preceding six months and not currently attending school or working full-time. In the case of caring for a newborn or newly adopted child, the mother or father may qualify for the deferment. The maximum time for each occurrence is six months.

Peace Corps Volunteer Deferment

If you volunteer full-time in the Peace Corps for at least a year, you may defer payments. To qualify for this deferment, your first Stafford or SLS loan must have been disbursed before July 1, 1993, or for parent borrowers, your PLUS loan must have been disbursed before August 15, 1983. Consolidation loans do not qualify for this deferment. You must be a full-time volunteer in the Peace Corps and serving for at least one year. The cumulative maximum time limit for this deferment is 36 months. Note: If you are in the Peace Corps and your first loan was disbursed on or after July 1, 1993, you may be eligible for an Economic Hardship Deferment (see above for details).

Post-Active Duty Student Deferment

You may apply for deferment if you are called to active military duty while enrolled in school. This deferment is available to borrowers who are members of the Armed Forces Reserve or National Guard (including retired members) and are called to active duty while still enrolled in school, or within six months after ceasing to be enrolled, on at least a half-time basis. The service period must begin on or after October 1, 2007, or include that date. The maximum time for each occurrence is 13 months.

Post-Enrollment Deferment

If your parents took out a loan to help you pay for school, or you took out a GradPLUS loan for graduate studies, payments may be deferred until six months after you graduate or leave school. For a parent borrower or a graduate or professional student who obtained a PLUS loan on or after July 1, 2008, the PLUS loan may be deferred for six months following the date the student ceases to be enrolled on at least a half-time basis.

Public Health Services Deferment

If you serve full-time as an officer in the Commissioned Corps of the Public Health Service, you may be able to defer payments. To qualify for this deferment, your first Stafford or SLS loan must have been disbursed before July 1, 1993, or for parent borrowers, your PLUS loan must have been disbursed before August 15, 1983. Consolidation loans do not qualify for this deferment. You must be serving full-time as an officer in the Commissioned Corps of the Public Health Service. The cumulative maximum time limit for this deferment is 36 months, inclusive of any Armed Forces and NOAA deferment time used.

Rehabilitation Training Deferment

You may defer payments if admitted to a rehabilitation training program. You may qualify for this deferment if you are receiving full-time training from a program that is licensed or approved by the Department of Veterans Affairs for providing rehabilitation training to disabled individuals or by a state agency responsible for vocational rehabilitation, drug abuse treatment, mental health services, or alcohol abuse treatment programs. For a parent borrower who has an outstanding loan disbursed on or after July 1, 1987, but before July 1, 1993, or who had a loan disbursed before July 1, 1993, outstanding when he or she obtained a loan after July 1, 1993, the PLUS loan may be deferred if the student is engaged in the rehabilitation training program. There is no cumulative maximum time limit for this deferment.

School Deferment

If you go back to school, you can apply for deferment. To qualify for this deferment, you must be enrolled at least half-time at an eligible school. For a parent borrower who has an outstanding loan disbursed on or after July 1, 1987, but before July 1, 1993, who had a loan disbursed before July 1, 1993, outstanding when he or she obtained a loan after July 1, 1993, or who obtained a PLUS loan on or after July 1, 2008, the PLUS loan may be deferred if the student is enrolled at least half time at an eligible school. There is no cumulative maximum time limit for this deferment.

Tax-Exempt Volunteer Deferment

If you volunteer for a tax-exempt organization and make no more than minimum wage, you may qualify for this deferment. To qualify for this deferment, your first Stafford or SLS loan must have been disbursed before July 1, 1993, or for parent borrowers, your PLUS loan must have been disbursed before August 15, 1983. Consolidation loans do not qualify for this deferment. You must be a full-time, paid volunteer in a tax-exempt organization that provides services to low-income individuals and their communities, and you must be earning no more than minimum wage. You must be serving for at least one year. The cumulative maximum time limit for this deferment is 36 months.

Temporary Total Disability Deferment

You may defer payments if you are disabled or care for someone who is. This deferment is available to borrowers whose first loan was disbursed before July 1, 1993. You must be temporarily totally disabled, which means you are unable to work and earn money or attend school for at least 60 days because of an injury or illness. You are also eligible for this deferment if you are unable to work because of continuously caring over at least 90 days for a dependent or spouse who is temporarily totally disabled due to an injury or illness. The cumulative maximum time limit for this deferment is 36 months.

Unemployment Deferment

Just in case If you can't find employment, you may defer payments for up to three years maximum. Unemployment can qualify you for deferment if you are actively seeking but unable to find full-time employment in the US. Full-time employment is defined as at least 30 hours of work per week in a position that is expected to last at least three months. The maximum time limit for this deferment is 36 months for borrowers who obtained their first loan on or after July 1, 1993, or 24 months for the others.

Working Mother Deferment

If you have young children and return to the workforce after leaving school, and make no more than $1 per hour over minimum wage, you may be eligible for deferring payments. This deferment is available to borrowers whose first Stafford or SLS loan was disbursed on or after July 1, 1987, but before July 1, 1993. PLUS and consolidation loans do not qualify for this deferment. You must be a mother of a preschool-age child, entering or re-entering the workforce, employed full-time, and earning a wage that is no more than $1 per hour over the minimum wage rate. The maximum time limit for this deferment is 12 months.


Available Forbearances 

On the off chance that you can't make installments and your circumstance doesn't qualify you for a deferment, you may demand forbearance. There are a few sorts of forbearance accessible. 

Active Military Duty 

Borrowers serving in the National Guard not secured by the military deferment may demand this forbearance. This forbearance is for borrowers who are not qualified for a military deferment. To meet all requirements for this forbearance, you should be an individual from the National Guard (counting a resigned member); called to deployment-ready while still took on school, or inside a half year after ceasing to be enlisted, on at any rate a half-time premise; and performing active military state duty during a period when the government enacts National Guard personnel The administration time frame must start on or after October 1, 2007, or incorporate that date. Forbearance is allowed in periods as long as a year at once. 

Company for National and Community Service (CNCS) Loan Repayment Program 

If you perform community service, you might have the option to delay installments. To meet all requirements for this forbearance, you should perform national help that fits the bill for halfway reimbursement of your loan under the National and Community Service Trust Act of 1993. You should state an approved CNCS official confirming qualification and the start and end dates of the service time frame. Forbearance is allowed in periods as long as a year at once. 

Division of Defense (DoD) Loan Repayment Program 

If you serve in the DoD and take an interest in its student loan repayment program, you may fit the bill for forbearance. To meet all requirements for this forbearance, you should be taking an interest in the DoD's loan reimbursement program and state an approved DoD official ensuring qualification and the start and end dates you are relied upon to perform service that qualifies you for halfway reimbursement of your loan. Forbearance is allowed in times of as long as a year at once. 

Disaster Forbearance 

On the off chance that you've been influenced by a disaster, we know there are difficulties ahead that may influence your capacity to make your student loan installments. A Disaster forbearance can help by incidentally delaying your federal student loan installments for as long as 90 days as you deal with recuperating. 

Hardship

On the off chance that you can't make your normal installments and don't fit the bill for other help alternatives, the difficulty forbearance might be for you. You may fit the bill for this forbearance if you are willing however briefly unfit to make booked repayments and don't fit the bill for a deferment or other kind of forbearance. Forbearance is conceded in times of as long as a year at once. 

Internship/Residency

Working in a clinical or dental internship position or residency may qualify you for forbearance. On the off chance that you have been acknowledged into a clinical or dental temporary job or residency program that requires a four-year (bachelor’s) certification, you may meet all requirements for an Internship/Residency forbearance. You should state an approved program official, and perhaps a state permitting office, guaranteeing qualification and the start and end dates of the program. 

Reduced Payment 

Pick an installment sum that fits in your spending plan, and that is your installment for the following year. Select your installment sum on this plan. The mentioned installment sum must cover in any event the evaluated monthly interest accumulated. If you are presently delinquent on your loan, we will process a hardship forbearance to bring your record current. 

Student Loan Debt Burden 

On the off chance that your installments absolute over 20% of your gross monthly salary, you may fit for forbearance. To meet all requirements for this forbearance, your student loan repayments must be equivalent to or more prominent than 20% of your all-out month to month pay. You should give verification of salary just as documentation of your regularly scheduled installments due on any Title IV loans. Title IV loans incorporate the loans made under the Federal Family Education Loan (FFEL) Program, Federal Direct Loan Program (FDLP), and Federal Perkins Loan Program. Forbearance is allowed in times of as long as a year at once with a total most extreme time cutoff of three years. 

Teacher Loan Forgiveness Program 

Educators at qualified schools may demand forbearance if they are performing teaching service to meet all requirements for loan forgiveness. To fit the bill for this forbearance, you should perform qualifying teaching service at a qualified elementary or secondary school or educational assistance office. Also, at the time you demand the forbearance, the forgiving sum must fulfill the foreseen exceptional balance of your loan at the time forgiveness is required to be allowed. You should give a statement ensuring your purpose to finish the service and the start and end dates of the current scholastic year of teaching service. Forbearance is conceded in periods as long as a year at once.




Frequently Asked Questions

  • 1.What is a hardship deferment?

    A deferment is a way to hold back or postpone the repayment of your student loan for a certain timeline of the period. It might be on various causes including economic hardship which may be lack of employment and other things too.

  • 2.Can I defer my student loans for a year?

    Deferring your loans when you are in school or college can really help bring down the payments as your income is limited. But in the end, you might be making payments more than your loan overall. The payment will be smaller than normal if you are paying the full principal with the interest. Therefore, you might be receiving a deferment for 48 months.

  • 3.What is a Deferment period?

    The deferment period is a timeline where the borrower doesn't require to pay interest or repay the principal of the loan. This period can also be followed by the issue of callable security where the issuer cannot call it back.

  • 4.Can I pay student loans while in deferment?

    Going into deferment with your loans or forbearance will give you financial relief. It is best for the situation such as if you are stuck with the burden of money which is making hard to pay for student loans dues. But the interest can accrue on loan at this timeline of deferment. Under deferment, you don't need to pay for interest but in forbearance, it will be accruing.

  • 5.What is the difference between Forbearance and Deferment?

    The key differences with the deferment are that you are not responsible for paying back the interest that is accrued on some loans types in the deferment period. Under Forbearance, you are responsible for the paying off those interest which accrues on all types of federal loans.

  • 6.How many times can you put your student loans in forbearance?

    Federal student loans which have 36 months of total deferment request with a 6 or 12-month increments and it has no limit on the number of forbearance request that you can make.

  • 7.Can you get a forbearance on a defaulted student loan?

    It takes around 9 months to get in a federal loan into default. If you are not able to get your payment dues on the federal student loan it's always better to call the servicer of your loan, let him/her know and request for a forbearance or deferment on your federal student loans.