How to Defer Federal Student Loans & What to Expect

Federal student loan deferment offers a temporary pause from making payments on educational debt. This option is particularly helpful during financial difficulty or when pursuing further education. Deferment is available for federal student loans, unlike private loans which may have varying terms.

Understanding Deferment

During deferment, the U.S. Department of Education generally pays the interest on certain types of loans, specifically Direct Subsidized Loans and Federal Perkins Loans. This means the loan balance for these specific loan types does not increase due to interest during the deferment period.

Interest continues to accrue, however, on other federal loan types such as Direct Unsubsidized Loans, Direct PLUS Loans, and the unsubsidized portion of Direct Consolidation Loans, even during a deferment. If this accrued interest is not paid by the borrower during the deferment, it will be added to the principal balance of the loan at the end of the deferment period, a process known as capitalization, which increases the total amount owed and the overall repayment cost over the life of the loan.

Eligibility for Deferment

Eligibility for federal student loan deferment is determined by specific circumstances and defined criteria for various deferment types. Each category has distinct requirements borrowers must satisfy to qualify for a payment pause.

An In-School Deferment is generally automatic for federal loans if a borrower is enrolled at least half-time at an eligible college or career school. Graduate or professional students who received a Direct PLUS Loan may qualify for an additional six months of deferment after they cease to be enrolled at least half-time. For an Economic Hardship Deferment, borrowers may qualify if they are receiving means-tested benefits, such as Temporary Assistance for Needy Families (TANF) or Supplemental Nutrition Assistance Program (SNAP). Another pathway to economic hardship deferment is if a full-time employed borrower’s monthly income is less than or equal to the federal minimum wage or 150% of the poverty guideline for their family size; this deferment has a maximum duration of three years.

Unemployment Deferment is available for borrowers who are actively seeking full-time employment or are receiving unemployment benefits. Borrowers seeking employment must demonstrate at least six diligent attempts to find full-time work within the past six months. This deferment can be granted for up to three years. Military Service Deferment applies to those on active duty in connection with a war, military operation, or national emergency. This deferment lasts for the duration of active duty service and may extend for a period after service ends.

A Graduate Fellowship Deferment is an option for borrowers enrolled in an approved graduate fellowship program, which provides financial support for full-time study and research. To qualify, the program must require a bachelor’s degree and involve a substantial commitment to study. Rehabilitation Training Deferment is available for those enrolled in an approved program designed to provide vocational, drug abuse, mental health, or alcohol abuse rehabilitation treatment. The program must be licensed or recognized by a relevant state agency or the Department of Veterans Affairs and require a substantial commitment from the borrower.

Applying for Deferment

Gathering Information and Completing the Application

Applying for federal student loan deferment involves obtaining the correct forms and gathering specific documentation. Borrowers can find forms on their loan servicer’s website or by contacting them directly. Identify the specific deferment type, as each has its own form and requirements.

The application process requires accurate information and supporting documents to verify eligibility. Required documentation includes:

• For In-School Deferment, proof of enrollment at least half-time, often provided directly by the school.
• For Economic Hardship Deferment, documentation of income (e.g., pay stubs, tax returns) or proof of public assistance benefits.
• For Unemployment Deferment, proof of unemployment benefits or evidence of active job searching (e.g., a log of job applications).
• For Military Service Deferment, copies of military orders or a statement from a commanding officer.
• For Graduate Fellowship or Rehabilitation Training Deferments, a statement from an authorized program official certifying enrollment and program details.

Submitting Your Application

Once all required information has been gathered and the deferment application form is fully completed, the next step involves submitting it to the loan servicer. Most federal loan deferments are not automatically granted and require a borrower-initiated request. Borrowers should continue making their regular payments until they receive confirmation that their deferment has been approved.

Application submission methods vary by loan servicer but commonly include online portals, mail, or fax. After submission, borrowers should expect to receive a confirmation of receipt from their servicer. Processing times can vary, from a few days to several weeks. Loan servicers may follow up with requests for additional information or clarification. Promptly responding to inquiries helps ensure a smoother and faster approval process.

Managing Your Loan During and After Deferment

Understanding ongoing responsibilities during and after a deferment period is important for effective loan management. For unsubsidized federal loans, interest continues to accrue throughout deferment. Borrowers have the option to pay this interest voluntarily to prevent it from being added to their principal balance at the end of the deferment, which would increase the total cost of the loan.

A deferment extends the overall repayment period of the loan, as payments are paused during this time. Borrowers should keep their contact information, including address, phone number, and email, updated with their loan servicer to ensure they receive important communications regarding their loan status. This includes notifications about the upcoming end of the deferment period.

As the deferment period approaches its scheduled end, borrowers should prepare for payments to resume. This involves budgeting for renewed monthly payments and reviewing their financial situation to ensure they can meet their obligations. If a borrower anticipates difficulty resuming payments, they should proactively contact their loan servicer to explore other repayment options, such as income-driven repayment plans, before the deferment ends.