How Long Can I Defer Student Loans?

Student loan deferment offers a temporary solution for borrowers facing challenges in making monthly payments. This option allows individuals to pause their student loan obligations for a defined period, providing financial relief during specific circumstances. It helps prevent loan default and allows borrowers to address immediate needs without the added burden of student loan payments.

Understanding Deferment

Deferment is a period when you are not required to make payments on your student loans. It differs from forbearance, another payment postponement option, primarily in how interest accrues. With forbearance, interest almost always continues to accrue on all loan types.

During deferment, interest generally does not accrue on subsidized federal student loans, including Perkins Loans. For unsubsidized federal loans, however, interest continues to accrue. Deferment is typically linked to specific qualifying events, whereas forbearance is often granted for broader financial hardship.

Common Deferment Options and Eligibility

The length of time you can defer student loans depends on the deferment type for which you qualify. Federal student loan deferments are available for various situations, often allowing a pause for up to three years, though this varies by reason. Eligibility criteria are defined for each deferment type.

In-School Deferment: Available if you are enrolled at least half-time in an eligible college or career school. This deferment typically lasts as long as you maintain the required enrollment status.
Unemployment Deferment: May be granted if you are unemployed or working less than 30 hours per week and actively seeking full-time employment, typically for up to three years.
Economic Hardship Deferment: Available for up to three years at a time, for borrowers experiencing financial difficulty. This can include receiving federal or state public assistance, working full-time but earning less than 150% of the poverty guideline for your family size, or having a debt-to-income ratio that indicates hardship.
Military Service Deferment: Available for those on active duty during a war, military operation, or national emergency, and for 13 months following their return from active duty.
Other Deferments: Include graduate fellowship programs, rehabilitation training, and cancer treatment.

The Deferment Process

To apply for student loan deferment, contact your loan servicer. This involves requesting the appropriate application form for the specific deferment type you need. Your servicer will provide the necessary paperwork and explain any specific requirements for your situation.

After completing the application form, submit any required supporting documentation. This documentation verifies your eligibility for the deferment. For example, an in-school deferment might require proof of enrollment, while an unemployment deferment may ask for evidence of unemployment benefits or job search activities.

Once your application and supporting documents are submitted, your loan servicer will review them. Continue making regular payments until you receive official notification that your deferment has been approved. Upon approval, your servicer will confirm the start and end dates of your deferment period.

Managing Interest During Deferment

Understanding how interest accrues is important during deferment. While payments are paused, interest can continue to accumulate, particularly on unsubsidized federal student loans. This means your total amount owed can increase during the deferment period.

For subsidized federal student loans and Perkins Loans, the U.S. Department of Education pays the interest during an approved deferment period. Your loan balance will not grow due to interest during that time. However, for unsubsidized federal loans, if you do not pay the accruing interest during deferment, it will be added to your principal balance when the deferment ends, a process known as interest capitalization.

Interest capitalization increases your total loan amount, meaning you will pay interest on a larger principal balance once repayment resumes. To mitigate this, borrowers with unsubsidized loans can choose to make interest-only payments during their deferment. This strategy prevents interest from capitalizing and helps keep the total loan cost from rising.