Making payments on a federal student loan in the time of coronavirus may be impossible for millions of borrowers who suddenly find themselves without a job. But even in good times, events may conspire to make repayment difficult. Happily, federal student loans have several mechanisms to offer you relief when you need it. The two temporary measures we’ll explore in this article are deferment and forbearance.
Federal student loans can be temporarily suspended for short periods through deferment and/or forbearance, features seldom found in private student loans. These two options differ in some respects, but share a few features:
- Typically, interest accrues during deferment or forbearance periods. Your loan balance will increase during these periods and add to the total amount you’ll have to repay. You can maintain your balance by paying just the interest during deferment or forbearance periods.
- Forbearance and deferment are temporary, as opposed to permanent loan forgiveness, which cancels your remaining balance if you participate in qualifying activities for a set period. However, you will not make progress toward forgiveness during periods of forbearance and deferment.
- For the 60-day period that began on March 13, 2020, all federal student loan borrowers can pause their repayments and incur no interest charges. You’ll have to contact your loan servicer to take advantage of this option. You will not have to provide any documentation to qualify. It’s possible this pause will be extended if the coronavirus pandemic continues beyond the original 60 days.
A federal student loan deferment is a temporary delay in the repayment of loan principal and interest, usually because of an inability to repay due to economic hardship. During deferment, the government may pay the interest on direct subsidized loans and Perkins loans, but not on unsubsidized and PLUS loans, where the interest accrues. Accrued interest is added to the principal amount of your loan once the deferment period ends.
You can apply for an economic hardship deferment by completing the Economic Hardship Deferment Request. You may qualify for an economic hardship deferment if:
- You engage in full-time work but earn less than 150% of your local poverty guideline; or
- You are receiving welfare or other means-tested benefit; or
- You are in the Peace Corps.
Alternatively, you can apply for a deferment if you are unemployed and cannot find a job. You can apply by completing an Unemployment Deferment Request.
An economic hardship or unemployment deferment cannot extend beyond three years.
You may qualify for a deferment due to non-economic reasons. You can use the following links to apply for one of these deferments:
- Graduate fellowship deferment
- In-school deferment
- Military service deferment
- Rehabilitation training deferment
- Parent PLUS borrower deferment
Forbearance allows you to stop making payments or reduce your monthly federal student loan payments for up to 12 months when you don’t qualify for a deferment. Interest accrues during periods of forbearance, although you can choose to make the interest payments during the period in order to avoid accrual.
There are two types of forbearance, discretionary and mandatory.
The decision to grant discretionary forbearance rests with your loan servicer. It is usually requested because of financial hardship, medical expenses, employment changes, or some other acceptable reason. This type of forbearance is available for Direct Loans, Federal Family Education (FFEL) Program loans, and Perkins Loans.
If you still need forbearance after 12 months, you can apply for another 12-month period. The cumulative limit on discretionary forbearance is 36 months. You can apply for discretionary forbearance by competing the General Forbearance Request.
Under mandatory deferment, your loan service must approve your deferment request if you meet the eligibility requirements. Generally, mandatory deferment applies to Direct Loans and FFEL Program loans.
You can receive a mandatory deferment if your student loan debt burden results in a monthly payment that is at least 20% of your total monthly gross income. This deferment can run for up to three years. You can apply by completing the Mandatory Forbearance Request: Student Loan Debt Burden.
Alternatively, you may qualify for mandatory forbearance (up to 12 months at a time) if you meet the eligibility requirements for any of following:
- AmeriCorps service
- Medical or dental internship or residency
- Department of Defense student loan repayment program
- National Guard duty
- Teacher loan forgiveness