A deferment might be useful if you're trying to figure out how to pay off your undergraduate loans while going back to school, enrolling in graduate school, or accepting an internship, clerkship, fellowship, or residency. You can lower or postpone your payments by deferring them.
You may benefit from deferment if you have financial difficulties or are undergoing medical treatment, military duty, or other obligations. What you should know about the various federal student loan deferment and how to apply is provided below.
What is Student Loan Deferment ?
A student loan deferment is an arrangement that enables you to postpone or reduce loan payments temporarily without affecting your credit scores. You may be able to stop paying loan payments or, in certain situations, lower them for a period of up to three years with a student loan deferment. Federally subsidized loans do not collect interest during the deferment period because the federal government pays the interest. Unsubsidized loans do, however, accrue interest, which is added to the balance owed at the end of the deferment term.
Deferring your student loan payments enables you to stop making them every month for a certain period of time. Private lenders may have different postponement regulations, but the federal government offers eight different kinds of deferments that you can be eligible for.
Key Facts of Student Loan Deferment
- A student loan deferral is a temporary reduction or postponement of your loan's monthly payments for a specific period of time.
- In some situations, student loan deferral enables you to stop making payments on your loan for up to 3 years, but it does not result in loan forgiveness.
- Unless you are enrolled in school at least half-time, you must submit a deferment application.
- Federally subsidized loans do not incur interest while they are being deferred.
- Unsubsidized loan interest does continue to accrue while in deferment and is applied to your loan at the conclusion of the deferral term.
How Does the Student Loan Deferment Work ?
Usually, deferments do not happen automatically. Before you stop paying payments, lenders ask that you apply for a deferral and meet certain qualifications. The majority of the time, you submit your request along with a form that lists your justification for the postponement as well as information about your loan.
If you have subsidized loans, the federal government will cover your interest expenses so that your loan doesn't increase while you're deferring payments. With unsubsidized loans, you are in charge of paying the interest. If you choose, you can make monthly interest payments, which can lower your overall borrowing costs over time.
When your loans go into deferment, you are not required to make monthly payments. The duration of the postponement period is laid out in the deferment agreement. It should be noted by borrowers that while deferment suspends your payments, interest may still accrue.
How to Qualify for Student Loan Deferment ?
You must fulfill certain requirements in order to be eligible for federal student loan deferment. Following are some typical examples of meeting the requirements:
- Being enrolled at least half-time at an eligible college or career school.
- Being unemployed or having financial difficulties (maximum of 3 years).
- Military service that is on active duty, as well as the 13 month period following service.
- Participation in a rehabilitation training program that have been approved.
- Participation in a graduate fellowship program that has been approved.
If you are having problems with your finances, speak with your loan servicer once more. You might be eligible for additional aid. Private student loan programs may offer some assistance, but they are significantly less lenient than federal loan programs.
Note :
Don't stop paying until you hear from your lender that your request has been approved and you are free to quit. Without this consent, late payments may incur penalties and fees.
Qualified Loans for Deferment
Any federal student debt can be put on deferment if you meet the requirements. Furthermore, certain private student providers might supply payment relief options, although as was already said, the guidelines and specifications vary per lender.
Federal Student Loan Deferment :
Eligibility requirements for federal student loans are unambiguous. Federal loans that offer deferment include :
- Perkins Loans
- Direct Subsidized and Unsubsidized Loans
- Direct PLUS loans
- FFEL Loans, including FFEL PLUS
- Direct consolidation loans (unsubsidized portion)
- FFEL consolidation loans (unsubsidized portion)
Deferment of federal student loans may occur automatically in certain circumstances, such as when you enroll at least half-time in an institution that is eligible.
Private Student Loan Deferment :
A standardized deferment plan is not provided by private lenders. However, if you're having financial difficulties, providers may work with you. The majority of private student loans continue to earn interest while in deferment, just like unsubsidized federal loans do. Delaying repayment of your private student loans isn't always the wisest course of action.
You must speak with your lender directly if you want to defer a private student loan. If you are in school, the military, or unemployed, many give some kind of postponement or remission. Some even offer deferment in cases of financial difficulty.
Cost of Student Loan Deferment
Deferment might be expensive if you have private or unsubsidized federal student loans. Due to the fact that, in contrast to subsidized loans, interest on these loans accrues during the deferment period and is capitalized (added to the outstanding balance) after the conclusion of deferment, this is the case. In addition to the sum you will pay over the loan's life, this raises the amount you owe when repayment first starts.
Consider taking out a $20,000 student loan with a 10 year repayment period and a 7% yearly interest rate. The amounts you would pay based on four distinct scenarios are shown in the table below :
- Paid as agreed.
- 36 months of interest free deferment as a subsidy.
- Unsubsidized with a 36-month deferment but paying interest during deferment.
- Unsubsidized with a 36-month deferment and no interest during deferment.
|
Payments on 10 Year
$20,000 Student Loan |
|||||
|
Monthly Payment |
Years 1–3 |
Years 4–10 |
Years 11–13 |
Interest |
Total |
|
Paid as agreed |
$232 |
$232 |
$0 |
$7,840 |
$27,840 |
|
Subsidized |
$0 |
$232 |
$232 |
$7,840 |
$27,840 |
|
Unsubsidized/interest paid |
$116 |
$232 |
$232 |
$12,016 |
$32,016 |
|
Unsubsidized/no interest paid |
$0 |
$281 |
$281 |
$9,559 |
$33,720 |
Request of Student Loan Deferment
You cannot stop making payments on student loans and declare yourself in deferment. Most deferments are not automatic, you need to submit a request to student loan servicer, often on a form. The majority of deferments also require you to submit documentation to show that you meet eligibility requirements for the deferment to your student loan servicer.
How to Request for Student Loan Deferment ?
Although there are different forms for each type of federal loan deferment, the procedure is generally simple and consistent.
- Go to the Federal Student Aid website and choose the appropriate deferment request form.
- To make sure you qualify, complete your personal information and check the eligibility section.
- Fill up the deferment application with any additional information needed, then sign and date it.
- Submit the deferment request with supporting documentation, directly to your student loan servicer.
Your loan servicer may require further information after you've submitted the request in order to make a decision. Keep in mind that if you have private student loans, you must speak with your lender to find out if you qualify and how to apply.
Types of Student Loan Deferment
The following deferment types apply to federal student loans. You can be eligible for a federal student loan deferment in a number of situations with different Student loan Deferment Form.
1) Cancer Treatment Deferment :
While receiving cancer treatment and for 6 months after it is over, you can be eligible for this deferment.
Fill out the Cancer Treatment Deferment Request.
2) Economic Hardship Deferment :
You may qualify for economic hardship deferment if you :
- Receiving a means-tested benefit, like welfare (Temporary Assistance for Needy Families).
- Work full-time but earn less than 150% of the poverty guideline for your family size and state of residence.
- Work for the Peace Corps.
You can only receive this deferment for maximum of 3 years.
Fill out the Economic Hardship Deferment Request.
3) Graduate Fellowship Deferment :
You may qualify for graduate fellowship deferment, if you are enrolled in approved graduate fellowship program. Typically, graduate fellowship programs offer financial aid to help students continue their education and do research. Some graduate fellowship programs are open to students pursuing master's degrees, but most are for doctorate students.
Fill out the Graduate Fellowship Deferment Request.
4) In-School Deferment :
If you are enrolled at least half-time in a career school or college that qualifies, you are qualified for this deferment. Graduate or professional students who took out a Direct PLUS Loan are eligible for an additional 6 months of deferment when they drop below a half-time enrollment requirement.
Most of the time, your loan will be automatically put into a deferment based on enrollment information supplied by your school if you are enrolled at least half-time in an authorized college or career school. Your loan servicer will then let you know that the deferment has been approved. If you are enrolled at least half-time but do not immediately get a deferment, get in touch with your school. The loan can then be put into deferment after your institution reports information regarding your enrollment status.
Fill out the In-School Deferment Request.
Note :
It is typically not essential to fill out the In-School Deferment Request because in-school deferment is typically automatic. The In-Institution Deferment Request must be submitted if you are enrolled at least half-time but do not automatically obtain a deferment.
5) Military Service and Post-Active Duty Student Deferment :
You may be eligible for military service and post-active duty student deferment if :
- Either you are serving in the military on active duty in support of a war, military operation, or national emergency.
- You have finished any necessary grace period in addition to your qualifying active duty service. This deferment expires 13 months after the completion date of active military service and any relevant grace period, whichever comes first, or when you enroll again at least half-time in an eligible college or career school.
6) Parent PLUS Borrower Deferment :
If you are a parent who took out a Direct PLUS Loan to assist pay for your child's education and the student you took out the loan for is enrolled at least half-time at an acceptable college or career school, you may be eligible for this deferral. After the student stops being enrolled at least half-time, you can also get a deferment for an additional six months.
Fill out the Parent PLUS Borrower Deferment Request.
Note :
If the school your kid is attending asks you to submit a Direct PLUS Loan Seek, you can request this deferral when you submit the Direct PLUS Loan Request as an alternative to filling out the Parent PLUS Borrower Deferment Request. Consult the child's school.
7) Rehabilitation Training Deferment :
If you're engaged in a rehabilitation training program that has been given the go-ahead and is intended to provide vocational, drug abuse, mental health, or alcohol abuse rehabilitation treatment, you might be eligible for this deferment.
Fill out the Rehabilitation Training Deferment Request.
8) Unemployment Deferment :
If you receive unemployment benefits or are looking for full-time work but are having trouble doing so, you might be qualified for this deferral. This postponement is available for a maximum of three years.
Fill out the Unemployment Deferment Request.
You can be qualified for additional deferments if you got federal student loans prior to July 1, 1993. Contact your loan servicer for further details regarding these deferments.
Frequently Asked Questions
What different loan types do I have?
If you have federally subsidized loans or Perkins loans, which don't accumulate interest during the postponement, applying for a deferment can be worthwhile. Due to the high cost of cumulative interest, it is frequently a smart idea to avoid delaying unsubsidized or private loans. Look into the possibility of making monthly interest-only payments as an alternative.
Am I able to make lower payments?
Keep in mind that deferring makes your monthly payment zero. An income-driven repayment plan should be given more thought if you have federal student loans and can afford a smaller monthly payment.
Is my financial situation temporary?
Deferment is intended to provide short-term financial relief. If you anticipate ongoing financial difficulties, you might wish to apply for a plan that offers extra support.
What is the benefits of student loan deferment ?
In the most dire circumstances, deferring your student debts might allow you to pay other urgent costs like rent and energy. When you're volunteering or in the military, you can help your community without worrying about paying back student loans because you're not now required to. Furthermore, you can relax even more if you have subsidized federal student loans because they won't accrue interest while they are on deferment.
What are the disadvantages of student loan deferment ?
Student loan deferment has disadvantages as well, particularly if the federal government does not subsidies your debts. This is due to the fact that interest will keep accruing at the standard rate before it is applied to the loan balance.
Can you be denied deferment?
Other sorts of deferments must also be supported by documents before the lender will approve or deny the request, depending on the lender's regulations or assessment of the request's legality.
How to Defer Student Loans ?
You should speak with your loan servicer to go over your choices if you need to halt payments on your federal student loans. You must submit an application in addition to the in-school deferment that is granted automatically to students who are enrolled at least half-time in school. Through your StudentAid.gov account, you can access federal loan application forms, or you can contact your lender. Up until a formal deferment decision is made, keep paying your normal loan installments. Your debts could go into default if you miss a payment, which would lower your credit score.
Can student loans be forgiven if in deferment?
Any time spent in deferment or forbearance generally won't count toward your loan forgiveness requirements if you're applying for forgiveness. This implies that until you start repaying again, your progress toward forgiveness will stop.
Does deferment hurt your credit?
Since a student loan deferral is approved by the lender, it has no directly effect on your credit score. Deferring student loan payments can increase the amount of unpaid debt and the age of that debt, which can lower a credit score. Another factor that can lower a credit score is waiting to request a deferral until an account is past due or in default.