Can You Defer Student Loan Payments?

Student loan deferment offers a temporary pause in required payments for federal student loans. This option is available under specific circumstances, providing borrowers relief from financial obligations. While payments are suspended, interest may or may not accrue, depending on the loan type and deferment reason.

Determining Your Deferment Eligibility

Qualifying for student loan deferment involves meeting specific criteria for various federal loan programs. An in-school deferment is generally automatic for borrowers enrolled at least half-time in an eligible college or career school. This deferment typically continues for an additional six months after graduation, leaving school, or dropping below half-time status. Parents who took out Parent PLUS loans can also apply for deferment while their child is enrolled at least half-time, though this is not automatic.

An unemployment deferment allows a temporary pause for up to 36 months if a borrower is receiving unemployment benefits or actively seeking full-time employment. To qualify, borrowers must provide documentation of unemployment benefits or certify at least six attempts to find full-time work within the last six months.

Economic hardship deferment is available for up to three years for borrowers experiencing financial difficulties. Eligibility requires meeting conditions such as receiving federal or state means-tested public assistance like Temporary Assistance for Needy Families (TANF) or Supplemental Nutrition Assistance Program (SNAP). Borrowers may also qualify if their income, despite working full-time, is less than or equal to 150% of the federal poverty guideline for their family size and state. Serving as a Peace Corps volunteer also establishes eligibility.

Military service deferment is available for active-duty service members during a war, military operation, or national emergency. This deferment can extend for 180 days following the completion of qualifying military service. A post-active duty student deferment is also available for National Guard or reserve members who were enrolled at least half-time when called to active duty, lasting up to 13 months after service ends.

Specific deferment types exist for unique situations, such as cancer treatment deferment, which is available during the treatment period and for six months afterward. Graduate fellowship deferment is for those enrolled in an approved graduate fellowship program. Rehabilitation training deferment applies to borrowers participating in an approved rehabilitation training program. For most deferment types, borrowers will need to submit specific forms and supporting documentation to their loan servicer. These forms are typically available on the Federal Student Aid website or through the loan servicer’s own website.

The Deferment Application Process

Initiating a deferment begins with obtaining the correct application form. These forms are typically available directly from your federal student loan servicer or can be downloaded from the Federal Student Aid website. Identifying the specific deferment type for your situation will guide you to the appropriate form.

Once the necessary form is acquired, it must be completed accurately, ensuring all required sections are filled out. This includes providing personal identification details and indicating the specific deferment period requested. Along with the completed form, you must gather all supporting documentation that proves your eligibility for the chosen deferment type. This documentation, which varies by deferment, might include enrollment verification, unemployment benefit statements, or military orders.

After preparing the complete application package, it must be submitted to your federal student loan servicer. Submission methods can vary, often including mailing the documents to a specified address, uploading them through an online portal if available, or faxing them. It is important to continue making your regularly scheduled student loan payments until you receive official notification that your deferment request has been approved. Failure to do so could result in your loans becoming delinquent or even going into default if the deferment is not approved.

Upon submission, the loan servicer reviews the application to ensure it is complete and all required documentation has been received. Processing times for deferment requests can vary, but many online applications might be processed within 24 hours, while others may take a few business days. If additional information is needed, the servicer will contact you to request it. Once a decision is made, the loan servicer will communicate whether your request has been approved or denied, typically through postal mail, and will provide details on the next steps for your loan account.

Understanding Deferment’s Financial Impact

Deferring student loan payments has varying financial implications, primarily depending on the type of federal loan you hold. For Direct Subsidized Loans, Subsidized Federal Stafford Loans, and Federal Perkins Loans, the U.S. Department of Education generally pays the interest that accrues during deferment. This means the loan balance for these types of loans will not increase due to interest during the approved deferment.

In contrast, for Direct Unsubsidized Loans, Unsubsidized Federal Stafford Loans, Direct PLUS Loans, and FFEL PLUS Loans, interest continues to accrue during deferment. Borrowers are responsible for paying this accrued interest. If not paid as it accrues, it will be capitalized, meaning it is added to the loan’s principal balance at the end of the deferment period.

Interest capitalization increases the total amount owed because future interest calculations will be based on a higher principal balance. This process can lead to a higher total loan cost over the repayment period and may result in increased monthly payments once repayment resumes. While interest capitalization occurs at the end of deferment for unsubsidized Direct and FFEL Program loans, it never occurs on Federal Perkins Loans, even if interest accrues.

Deferring payments can extend the overall repayment period, as time spent in deferment does not count towards the standard repayment term. While deferment offers immediate payment relief, understanding its long-term financial effects, particularly regarding interest accrual and capitalization, is important for managing the total loan cost. Borrowers can choose to pay the interest that accrues on unsubsidized loans during deferment to avoid capitalization and mitigate the increase in their loan balance.