One of the unique benefits of federal student loans is the ability to defer payments when circumstances require. Generally, private student loans don’t offer deferment, although you may be able to negotiate one with your lender. If you have federal student loans and need some help repaying them, follow these seven steps to apply for a deferment. While deferments are temporary, they can come in handy during times of need.
- Understand How Deferment Works
Deferment temporarily suspends your student loan payments. In most cases, your interest will accrue during the deferment period. That means the interest you would have paid is instead added to the loan principal balance, a process called capitalization. This will increase your monthly payments and the total cost of your loan.
If you’d like to avoid capitalization, you might instead consider an income-driven repayment plan that reduces you monthly payment and may shorten the repayment period. Alternatively, you can avoid capitalization by paying the interest during the deferment period, postponing principal repayments only.
Deferment periods vary by type. You can defer federal student loans for no more than three years.
- Check Your Loan for Eligibility
Most but not all federal student loans offer deferments. Some federal student loans hold you responsible for paying accrued interest (i.e., unsubsidized loans), while other loans do not (subsidized loans).
Loans That Do Not Hold You Responsible for Accrued Interest
The following types of federal student loans do not charge you for interest that accrues during a deferment period:
- Direct Subsidized Loans
- Subsidized Federal Stafford Loans
- Federal Perkins Loans
- The subsidized portion of Direct Consolidation Loans
- The subsidized portion of FFEL Consolidation Loans
If you have a Perkins Loan, you may receive a deferment as you work toward cancellation. Furthermore, if you receive a Perkins Loan deferment, you’ll also get an extra six-month grace period once you no longer qualify for deferment.
Loans That Hold You Responsible for Accrued Interest
- Direct Unsubsidized Loans
- Unsubsidized Federal Stafford Loans
- Direct PLUS Loans
- Federal Family Education Loan (FFEL) PLUS Loans
- The unsubsidized portion of Direct Consolidation Loans
- The unsubsidized portion of FFEL Consolidation Loans
Note that accrued interest is capitalized only on Direct Loans and FFEL Program loans. The other unsubsidized loan types require you to pay the interest as it comes due.
- Verify You Are Eligible
Normally, you need to submit a deferment request form to your loan servicer. If you need a deferment due to economic hardship, you must check one of these boxes:
- You are receiving welfare payments or other means-tested benefits, or
- You have a full-time job but earn less than 150% of your state’s poverty guideline for you family size, or
- You are in the Peace Corps.
Besides the economic hardship deferment, there are several other reasons for deferment, described below.
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COVID-19 Automatic Suspension
Due to the pandemic, the federal government has granted an automatic suspension of student loan repayments through September 30, 2020.
During this period, the interest rate on the following loan types is set to 0%:
- Defaulted and nondefaulted Direct Loans
- Defaulted and nondefaulted FFEL Program loans
- Federal Perkins Loans
If you have a Federal Family Education Loan (FFEL) Program or Federal Perkins loans not owned by the Department of Education, you may be able to take advantage of the 0% interest rate through a Direct Consolidation Loan. After the period ends, you may face an interest rate higher than your current one. Any outstanding interest will be capitalized when you consolidate.
If you are in an income-driven repayment plan, the suspended payments will count toward loan forgiveness. Direct Loan suspended payments might also count toward Public Service Loan Forgiveness – check with your loan servicer for details — and towards rehabilitation of defaulted loans. You may elect to decline the suspension offer by contacting your loan servicer.
- Select the Appropriate Type of Deferment
In addition to the Economic Hardship Deferment, these are the different types of loan deferments:
- Cancer Treatment Deferment: Available for patients undergoing cancer treatment. You can also defer payments for six months after the end of your treatment regime.
- Graduate Fellowship Deferment: You must be enrolled in an eligible graduate fellowship program. These are usually programs that provide a living stipend to master’s and doctoral students.
- In-School Deferment: For students enrolled at least half-time at an eligible institution. This is an automatic deferment, but you should verify your status with your loan servicer. Graduate/professional students with Direct PLUS loans receive an extra six months of deferment once you cease at least half-time enrollment.
- Military Service and Post-Active Duty Student Deferment: To qualify, you must be on active military duty or have completed active duty service and any grace period.
- Parent PLUS Borrower Deferment: For parents with Direct PLUS Loans for their child’s education. The student must be enrolled at least half-time at an eligible institution. You get an extra six months of deferment once the student leaves school.
- Rehabilitation Training Deferment: Available if you are enrolled in an approved rehabilitation training program that is designed to provide drug abuse, mental health, vocational, or alcohol abuse rehabilitation treatment.
- Unemployment Deferment: You can qualify if you are receiving unemployment benefits or are unable to find a full-time job. The deferment is available for up to three years.
- Gather Supporting Documentation
The required documentation varies with the type of loan deferment. For example, you may be asked to document monthly income, Peace Corp service certification, receipt of welfare payment, etc. Your deferment request form will specify what documentation is required.
- Submit the Required Application
Here are the links to the various deferment request forms: