Life is unpredictable. One moment, you’re on track with your student loan payments, and the next, an unexpected job loss, medical emergency, or financial setback can make that monthly bill feel impossible. If you’re facing financial hardship, it’s easy to feel overwhelmed, but you should know you’re not alone and there are options available to help.
The U.S. federal government provides safety nets for student loan borrowers through programs like student loan deferment and student loan forbearance. Both options allow you to temporarily pause or reduce your monthly payments, providing critical breathing room when you need it most. However, they work in slightly different ways and have distinct implications for your loan’s total cost.
Understanding the difference between deferment and forbearance is crucial for making the best decision for your financial future. This comprehensive guide will walk you through everything you need to know. We’ll explore what each program entails, the specific eligibility requirements, how to apply, and what happens to your interest. We’ll also cover important alternatives that might be a better fit for your situation. Let’s dive in and find the right path for managing your student loans during challenging times.
What Is Student Loan Deferment? A Simple Guide to Pausing Payments
Student loan deferment is a formal process that allows you to temporarily postpone payments on your federal student loans. To qualify, you must meet specific eligibility criteria related to events like unemployment, economic hardship, or military service. You typically need to submit an application and provide supporting documentation to your loan servicer to be approved.
The key advantage of deferment is the potential interest subsidy. For certain types of federal loans, such as Direct Subsidized Loans and Federal Perkins Loans, the government may pay the interest that accrues during the deferment period. This means your loan balance won’t grow while your payments are paused, making it a powerful financial tool.
What Is Student Loan Forbearance? A More Flexible Option
Student loan forbearance also allows you to temporarily stop making payments or, in some cases, make smaller payments for a specific period. Forbearance is often more flexible and easier to obtain than deferment, especially if you don’t meet the strict criteria for one of the deferment categories.
However, this flexibility comes at a cost. During forbearance, interest continues to accrue on all types of federal student loans, without exception. If you don’t pay this interest as it accrues, it will be capitalized—added to your principal loan balance—when the forbearance period ends. This can significantly increase the total amount you owe over time.
Ultimately, your personal and financial situation will determine whether deferment or forbearance is the right choice for you. Let’s explore the specific reasons you might qualify for each.
8 Scenarios That Qualify for Student Loan Deferment
There are eight primary situations where you can apply to have your federal student loans deferred. Here is a detailed breakdown of each one.
1. Cancer Treatment Deferment
If you are undergoing treatment for cancer, you can pause your student loan payments. According to the Federal Student Aid office, this deferment covers the period you are receiving treatment and extends for an additional six months after your treatment concludes, giving you time to recover financially and physically.
How to apply: You must complete and submit the Cancer Treatment Deferment Request form to your loan servicer.
2. Economic Hardship Deferment
If you are experiencing significant financial strain, you may qualify for an economic hardship deferment for up to three years. This is intended for borrowers with very low incomes. You may be eligible if you meet one of the following conditions:
- You are receiving means-tested federal or state public assistance, such as welfare benefits.
- You are serving as a volunteer in the Peace Corps.
- You are working full-time but your monthly earnings are less than 150% of the poverty guideline for your family size and state.
How to apply: Fill out the Economic Hardship Deferment Request form and provide the required proof of your situation.
3. Graduate Fellowship Deferment
If you are enrolled in an approved graduate fellowship program, you can defer your loan payments. This is common for doctoral students whose fellowships provide a stipend for living expenses but may not be enough to cover student loan payments. The deferment eases your financial burden while you focus on your research and studies.
How to apply: Complete the Graduate Fellowship Deferment form with information about your fellowship program.
4. In-School Deferment
If you return to college or a career school at least half-time, you are eligible for an in-school deferment. For most borrowers, this process is automatic. Your school reports your enrollment status to the National Student Clearinghouse, which then notifies your loan servicer to place your loans in deferment. Graduate and professional students also receive an additional six-month deferment period after they drop below half-time enrollment.
How to apply: This deferment is typically automatic. If your loans are not deferred automatically, contact your school’s registrar or financial aid office to confirm they have reported your enrollment. If necessary, you can also manually submit the In-School Deferment Request form.
5. Military Service and Post-Active Duty Student Deferment
Members of the armed forces may qualify for deferment in two key scenarios. You are eligible if you are on active duty military service in connection with a war, military operation, or national emergency. Additionally, after completing your qualifying service, you can receive a 13-month post-active duty deferment. This period is designed to help you transition back to civilian life without the immediate pressure of loan payments.
How to apply: Submit the Military Service and Post-Active Duty Student Deferment Request form.
6. Parent PLUS Borrower Deferment
This deferment applies specifically to parents who took out a Parent PLUS Loan for their dependent child’s education. A parent can defer payments while the student for whom the loan was borrowed is enrolled at least half-time at an eligible school. The deferment can also be extended for an additional six months after the student graduates or drops below half-time status.
How to apply: You can request this deferment by filling out the Parent PLUS Borrower Deferment Request form. In many cases, you can also request it directly on the initial Direct PLUS Loan application.
7. Rehabilitation Training Deferment
You can defer your student loans if you are enrolled in an approved rehabilitation training program. This includes programs for vocational rehabilitation, drug abuse treatment, or mental health services. The program must be licensed or recognized by a state agency to qualify.
How to apply: Fill out and submit the Rehabilitation Training Deferment Request form.
8. Unemployment Deferment
If you are unemployed and actively seeking full-time work, you may be eligible for an unemployment deferment for up to three years. You can qualify if you are receiving unemployment benefits or if you are diligently searching for a full-time job (defined as working at least 30 hours per week) but have been unable to find one.
How to apply: Complete the Unemployment Deferment Request form and provide documentation of your unemployment status or job search.
When to Use Student Loan Forbearance
If you don’t qualify for a deferment but are still struggling to make payments, forbearance might be the right solution. Forbearance is divided into two categories: general and mandatory.
General Forbearance (Discretionary)
General forbearance is granted at the discretion of your loan servicer. You can request it for various reasons, and it’s up to the servicer to approve it based on your situation. Common reasons for approval include:
- Unexpected financial difficulties
- High medical or dental expenses
- A sudden change in employment or loss of income
- Other personal situations that your servicer finds acceptable
A servicer can grant general forbearance for up to 12 months at a time, with a cumulative limit of three years. Remember, interest always accrues and capitalizes with this option.
How to apply: You typically need to contact your loan servicer directly or complete a General Forbearance Request form.
Mandatory Forbearance
Unlike general forbearance, your loan servicer is required to grant a mandatory forbearance if you meet the specific eligibility criteria. You can receive it for up to 12 months at a time and can reapply if you continue to qualify. Key reasons for mandatory forbearance include:
- AmeriCorps Service: You are serving in an AmeriCorps position and have received a national service award.
- Department of Defense Loan Repayment: You qualify for partial loan repayment under a U.S. Department of Defense program.
- Medical or Dental Internship/Residency: You are participating in a medical or dental internship or residency program that requires at least a bachelor’s degree.
- National Guard Duty: You are a member of the National Guard and have been activated by a governor, but you do not qualify for a military deferment.
- High Student Loan Debt Burden: Your total monthly federal student loan payment is 20% or more of your total monthly gross income.
- Teacher Loan Forgiveness: You are performing teaching service that qualifies you for the Teacher Loan Forgiveness Program.
How to apply: For each of these situations, there is a specific request form you must complete and submit to your servicer with the required documentation.
Frequently Asked Questions About Deferment and Forbearance
Navigating these options can be confusing. Here are answers to some common questions.
Does interest accrue during deferment or forbearance?
This is the most critical question. The answer depends on your loan type and the program you use.
- During Forbearance: Yes, interest always accrues on all loan types. You are responsible for this interest.
- During Deferment: It depends. The government pays the interest on Direct Subsidized Loans, Federal Perkins Loans, and the subsidized portion of consolidation loans. For all other loans (like unsubsidized and PLUS loans), you are responsible for the accruing interest.
If you are responsible for the interest, you can either pay it monthly or allow it to be capitalized at the end of the period. Capitalization adds the unpaid interest to your principal balance, which means you’ll pay interest on a larger amount going forward, increasing your total repayment cost.
How does interest capitalization impact my total loan cost?
Capitalization can be very costly. Let’s look at an example. Imagine you have a $30,000 unsubsidized loan with a 5% interest rate. You enter forbearance for one year.
During that year, your loan accrues $1,500 in interest ($30,000 x 0.05). If you don’t pay this interest, it gets capitalized. Your new principal balance becomes $31,500. Now, interest will be calculated based on this higher balance, leading to a snowball effect that increases your total repayment amount and potentially extends your repayment timeline. This is why it’s highly recommended to pay the interest during forbearance or deferment if you can afford to.
Are there better alternatives to deferment or forbearance?
Yes! Before you pause payments, you should first consider an Income-Driven Repayment (IDR) plan. These plans are often a better long-term solution because they adjust your monthly payment to be an affordable percentage of your discretionary income (typically 10-15%).
Under an IDR plan, you continue to make progress on your loan, and your payments could be as low as $0 per month if your income is very low. Any remaining loan balance is forgiven after 20-25 years of qualifying payments. This can be a much more sustainable way to manage your debt than a temporary pause.
Can I get deferment or forbearance for private student loans?
The federal programs described in this article do not apply to private student loans. However, many private lenders offer their own hardship programs, which may include temporary forbearance or reduced payments. You must contact your private lender directly to discuss your situation and see what options they have available. Policies vary widely from lender to lender.
Take Control of Your Student Loan Payments
Facing difficulty with your student loan payments can be stressful, but these federal programs exist to provide a safety net. Whether you choose deferment, forbearance, or an income-driven repayment plan, the most important step is to be proactive.
Never simply stop making payments without communicating with your loan servicer. This can lead to delinquency and default, which will severely damage your credit. Contact your servicer as soon as you anticipate trouble. They are there to help you understand your options and find the best path forward for your financial health.