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deferment and forbearance

If you meet certain criteria, you may be eligible to receive a deferment or forbearance, which allows you to temporarily postpone or reduce your federal student loan monthly payments. This will help you avoid defaulting on the loan, even if you are facing financial hardship. Your loan servicer can help you apply for deferment or forbearance, but you must continue to make payments on the loan until the deferment or forbearance has been approved. If you do not, you will be delinquent and may face defaulting on your loan.

Deferment

During a deferment period, the repayment of the principal and interest on your student loan is delayed – but only temporarily. You do not need to make payments during this time, and depending on your type of loan (Federal Perkins, Direct subsidized, or subsidized Federal Stafford), the government, instead of you, could pay the interest on your loan. Unsubsidized and PLUS loans are not eligible for the government to pay your interest.

There are a number of circumstances that would make you eligible for deferment. You should consider applying for a deferment if you are unemployed or cannot find full-time employment; if you are undergoing a period of economic hardship; if you are active military duty or within the 13 months following the conclusion of qualified active duty military service. These are just a few scenarios where student loan deferment is the right choice for you. For more information, visit the Student Aid website.

Deferments are not automatic, and you will most likely need to apply through your loan servicer for Direct and FFEL loans. For Perkins loans, contact the school.

Forbearance

If you are in a position where you cannot afford to make your scheduled payments, but do not qualify for a deferment, forbearance may be the right avenue for you. You can stop or reduce your payments for up to 12 months, but interest will continue to accrue.

There are two types of forbearances, discretionary and mandatory. Discretionary forbearances are decided upon by the lender, and are granted based on financial hardship or illness. Mandatory forbearances are eligibility-based, and if you qualify, your lender is required to grant it. Some criteria include income requirements, medical or dental residency, performing national service or teaching services, or active National Guard personnel who do not qualify for military deferments.

Forbearances are not automatic and must be requested through your lender. You may also need to provide supporting documentation. If the forbearance is granted, interest continues to be charged on subsidized and unsubsidized loans. You can choose to pay the interest during forbearance, or let it accumulate. But if it accumulates, it may be added to your principal balance, and the overall amount that you end up paying in the future will be higher than if you didn’t choose forbearance.

What if I don’t qualify for deferment or forbearance?

You should contact your lender and see if you can work out a repayment plan. There may be a student loan repayment program that can lower your payments and make things easier on you financially. 

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