How to defer student loans

Wondering how to defer student loans? You can do so for most federal loans but not all private ones. (Shutterstock)

The federal student loan payment pause is set to expire on Aug. 31, 2022, which makes now a good time to start figuring out how you can fit loan payments back into your budget. 

If loan payments will be hard to manage, you could apply for deferment. Eligibility requirements vary, but experiencing financial hardship or being active-duty military are examples of scenarios when you might qualify for deferment.

Read on to learn how to defer student loans, the eligibility requirements, and whether this is the right move for you.

Refinancing your student loans is another option to help make your monthly payments more manageable. Visit Credible to learn about private student loan refinancing.

  • What is student loan deferment?
  • How to defer student loans
  • Eligibility requirements for deferment
  • Which student loans accrue interest during deferment?
  • Types of federal student loan deferment
  • How long can you defer student loans?
  • Should you defer your student loan payments?
  • Alternatives to student loan deferment 

What is student loan deferment?

Student loan deferment is a period where you don’t have to make loan payments. You’re not penalized for nonpayment during this break, so missed payments won’t affect your credit history. 

Deferment is available for most federal loans, but private lenders may or may not offer it. If you ever have trouble keeping up with private loan payments, ask your lender what payment relief options are available. 

Deferment vs. forbearance

Forbearance is another way to postpone student loan payments, but forbearance works differently from deferment.

When certain federal loans are in deferment, you aren’t charged interest, which can offer some savings. In comparison, when federal loans are in forbearance, you’re always responsible for paying the interest — you can either pay the interest as it accrues, or you can let it accrue and be added to your balance at the end of your forbearance period. 

How to defer student loans

You need to fill out a request form and submit it to your loan servicer to defer your student loans. Follow these steps: 

For private student loans, the deferment process can vary depending on the lender. Check the lender’s website or contact the lender directly to see if deferment is available. 

Eligibility requirements for deferment

Eligibility requirements are different for each type of deferment. But one overarching requirement is the need for your loans to be in good standing. 

You can’t defer loans that fall into default status — this happens when a loan payment becomes 270 days or more late. If cash gets tight, applying for deferment sooner rather than later can give you time to catch up financially before you fall too far behind. 

The federal loan types that are eligible for deferment are:

  • Direct Subsidized Loans
  • Direct Unsubsidized loans
  • Federal Perkins Loans
  • Subsidized Federal Stafford Loans
  • Unsubsidized Federal Stafford Loans
  • Direct PLUS Loans
  • FFEL Consolidation Loans
  • Direct Consolidation Loans

Credible lets you compare student loan refinance rates from private lenders, without affecting your credit score.

Which student loans accrue interest during deferment?

Whether interest accrues during deferment depends on the loan type.

These federal loans don’t accrue interest while in deferment:

  • Direct Subsidized Loans
  • Subsidized Federal Stafford Loans
  • Federal Perkins Loans
  • The subsidized portion of Federal Family Education Loans (FFELs)
  • The subsidized part of Direct Consolidation Loans

These federal loans do accrue interest while in deferment:

  • Direct Unsubsidized Loans
  • Unsubsidized Federal Stafford Loans
  • Direct PLUS Loans
  • The unsubsidized part of Direct Consolidation Loans
  • The unsubsidized part of FFEL Consolidation Loans

Private student loans may accrue interest during deferment periods as well. You may be able to pay the interest as it accrues or let it capitalize and pay it later. Just keep in mind that capitalization means interest will be added to your principal each month, which can increase your balance over time. 

If your interest rate is high, refinancing private loans is an option to consider that might lower your interest rate and make your monthly payment more manageable.  

Types of federal student loan deferment

Borrowers with federal loans have several deferment options. Here are the various types of deferment and how they work: 

Economic hardship deferment

You may be eligible for an economic hardship deferment if you’re currently receiving public assistance, working full-time but making less than 150% of the poverty line for your state of residence and family size, or you’re serving in the Peace Corps. 

In-school deferment

You may qualify for deferment if you’re enrolled in school at least half-time. Deferment is typically processed automatically when your school reports your attendance. If not, you should contact the school you’re enrolled in. Graduate and professional students with Direct PLUS Loans may be able to extend this deferment for an additional six months after no longer being enrolled at least half-time.

Unemployment deferment

If you’re currently unemployed and having trouble finding full-time employment, you may be able to qualify for unemployment deferment.  

Graduate fellowship deferment

If you’re currently taking part in an approved graduate fellowship program, you may be able to qualify for the graduate fellowship deferment. 

Parent PLUS borrower deferment

If you’re a parent who took out Parent PLUS Loans for your child, and they’re in school at least half-time, you may be able to defer loan payments. You may also be eligible for a deferment of an extra six months after your child is no longer enrolled at least half-time.

Military service and post-active duty student deferment

Active-duty service members may be able to defer loans during war, military operations, or national emergencies. After completing active-duty service and any grace period that applies, you may also be able to extend the deferment for an additional 13 months.

Cancer treatment deferment

If you’re a borrower undergoing cancer treatment, you may be able to defer loans during the treatment and for six months afterward.

Rehabilitation training deferment

If you join an approved vocational rehabilitation program or a program for drug abuse, mental health, or alcohol abuse treatment, you may be able to defer your loans while in the program. 

SHOULD YOU REFINANCE YOUR STUDENT LOANS? BEST LENDERS TO CONSIDER

How long can you defer student loans?

The length of time you can defer loans varies. If you’re deferring because of economic hardship or unemployment, you may be able to defer loans for up to 36 months.

Military service members may be able to defer payments while on active duty and for up to 13 months after active-duty service. 

In other cases, the deferment period is set based on how long you’re receiving cancer treatment, taking part in a graduate fellowship, or enrolled in school at least half-time. Visit the Federal Student Aid website for more information.

STUDENT LOAN REFINANCE VS. CONSOLIDATION: WHAT’S THE DIFFERENCE?

Should you defer your student loan payments? 

Deferring student loans can be a good temporary solution to fall back on when you’re having trouble making ends meet, but it shouldn’t be a long-term fix, as pausing payments comes with disadvantages. 

First, postponing payments can extend your loan term and affect your ability to qualify for loan forgiveness programs. For example, months you don’t pay won’t count toward Public Service Loan Forgiveness (PSLF) after the COVID-19 payment pause ends. And if you defer loans that accrue interest, your balance could also snowball. So, deferment may not make sense if you’re on track for PSLF, or there’s no personal or financial situation that makes you unable to pay.

It’s best to only turn to deferment during times of serious financial hardship.

With Credible, you can compare student loan refinance rates from various lenders in minutes.

Alternatives to student loan deferment 

Income-driven repayment (IDR) plans and forbearance can lower your monthly payments or give you a short-term payment break if you don’t qualify for deferment. 

Income-driven repayment plans

Income-driven repayment plans set your payments based on your disposable income. A repayment plan may be a better option than deferment if you’re working toward PSLF, since paying under a plan counts toward your 120 qualifying payments. The U.S Department of Education offers four IDR plans: 

  • Pay As You Earn Repayment Plan (PAYE Plan) — Payments are 10% of your discretionary income, but no more than what you’d pay under the 10-year Standard Repayment Plan. Loans are forgiven after 20 years of payments.
  • Revised Pay As You Earn Repayment Plan (REPAYE Plan) — Payments are typically 10% of your discretionary income, and the amount owed will be forgiven after 20 years for undergraduate loans and 25 years for graduate loans.
  • Income-Based Repayment Plan (IBR Plan) — Payments are 10% of your discretionary income if you’re a new borrower on or after July 1, 2014, but are never more than what you’d pay on the Standard Repayment Plan, and your loans are forgiven after 20 years. If you’re not a new borrower on or after that date, your monthly payments are 15% of your discretionary income and your loans are forgiven after 25 years.
  • Income-Contingent Repayment Plan (ICR Plan) — You pay the lesser of 20% of your discretionary income or what you’d pay over the course of a 12-year fixed term. Loans are forgiven after 25 years of payments, and this is the only payment plan option available for Parent PLUS Loans.

Forbearance 

If you don’t qualify for deferment, you may be eligible for forbearance instead. Two types of forbearance exist — general forbearance and mandatory forbearance. 

Loan servicers may offer general forbearance at your request if you’re experiencing financial difficulties, dealing with medical expenses, or changing employment.

Federal loan servicers must offer mandatory forbearance to all borrowers who meet certain criteria. You may be eligible for mandatory forbearance if your monthly payments on all student loans are 20% or more of your gross monthly income, for up to three years. 

Other scenarios when you might qualify for mandatory forbearance are:

  • You’re serving in AmeriCorps and received a national service award.
  • You’re making payments under the U.S. Department of Defense Student Loan Repayment Program.
  • You’re taking part in a medical or dental internship or residency program.
  • You’re in the National Guard and have been activated by the governor, but you aren’t eligible for a military deferment.
  • You’re a teacher working toward Teacher Loan Forgiveness.

Like deferment, forbearance isn’t a permanent solution. Applying for an income-driven repayment plan after payments resume could be a better long-term plan.

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