How to Defer Your Student Loans: A Process

Student loan deferment offers a temporary pause on federal student loan payments for borrowers experiencing specific qualifying situations. This allows individuals to suspend monthly payments without their loans entering default. Deferment is distinct from other repayment options, providing a structured way to manage financial obligations during periods of hardship or continued education.

Understanding Student Loan Deferment Options

Federal student loan deferment provides various options for borrowers to temporarily postpone payments based on specific circumstances. Each type has distinct eligibility criteria and requires documentation to qualify.

In-School Deferment

One common deferment is the In-School Deferment, typically available when a borrower is enrolled at least half-time at an eligible college or career school. In many cases, this deferment is applied automatically based on enrollment reporting from the school. If the deferment does not apply automatically, borrowers can contact their school to report their enrollment status or submit an in-school deferment form to their loan servicer. Graduate or professional students with Direct PLUS Loans may qualify for an additional six months of deferment after their enrollment ceases.

Unemployment Deferment

Another option is the Unemployment Deferment, which can pause payments for up to three years. To qualify, borrowers must either be receiving unemployment benefits or actively seeking and unable to find full-time employment. If seeking employment, borrowers must certify that they have made at least six attempts to find full-time work within the last six months. Documentation such as proof of unemployment benefits or registration with an employment agency may be required.

Economic Hardship Deferment

The Economic Hardship Deferment is available for federal student loans obtained after July 1, 1993, allowing a pause for up to three years. Eligibility depends on factors such as receiving means-tested federal or state public assistance, like Temporary Assistance for Needy Families (TANF) or Supplemental Security Income (SSI). Borrowers may also qualify if their monthly income is less than or equal to the federal minimum wage or 150% of the poverty guideline for their family size and state of residence. Peace Corps volunteers are also eligible for this deferment.

Military Service Deferment

Military Service Deferment is available for those on active duty in connection with a war, military operation, or national emergency. This deferment can also apply to post-active duty service members, covering periods immediately following active duty or while preparing to return to school. Proof of military service, such as official military orders or a statement from a commanding officer, is typically required.

Applying for Student Loan Deferment

After identifying the appropriate deferment option and gathering necessary information, submit the application. The process centers on providing the completed deferment request form and supporting documentation to the loan servicer.

Borrowers obtain the official deferment application form from their federal student loan servicer’s website or the Federal Student Aid website. After completing the form, which includes certifying eligibility and providing personal details, all required supporting documents must be attached. These documents vary by deferment type, but may include enrollment verification, proof of unemployment benefits, income statements, or military orders.

Submission of the completed application and documents can often be done through various methods, including mail, online portals, or occasionally fax. It is advisable to keep copies of all submitted forms and supporting documentation for personal records.

After submission, borrowers should continue making their regular loan payments until they receive official notification that their deferment request has been approved. Stopping payments prematurely could lead to delinquency or even default if the deferment is not granted. Loan servicers typically process requests within a few weeks and will notify the borrower of the decision, sometimes requesting additional information if needed.

Managing Your Loans During and After Deferment

While deferment pauses payments, interest may continue to accrue on certain loan types. The treatment of interest depends on whether the loan is subsidized or unsubsidized.

For Direct Subsidized Loans and Federal Perkins Loans, interest generally does not accrue during the deferment period, meaning the loan balance will not increase. However, for Direct Unsubsidized Loans, Direct PLUS Loans, and Federal Family Education Loan (FFEL) Program loans, interest continues to accumulate during deferment. Borrowers with these loan types are responsible for this accrued interest.

If the accrued interest on unsubsidized loans is not paid during the deferment period, it will be added to the principal balance of the loan at the end of the deferment. This process is known as interest capitalization. Capitalization increases the total principal amount, which means future interest will be calculated on a larger sum, potentially increasing the overall cost of the loan and future monthly payments. Borrowers can choose to make interest-only payments during deferment to avoid capitalization.

Throughout the deferment period, borrowers must keep their contact information updated with their loan servicer and understand the end date of their approved deferment. This allows borrowers to prepare for the resumption of payments.

As the deferment period approaches its end, the loan servicer typically sends notifications to the borrower, outlining the upcoming re-entry into repayment. The first payment due date will be specified in these communications. If a borrower anticipates continued financial difficulty after deferment, they should proactively contact their loan servicer before the deferment ends to explore other repayment options, such as income-driven repayment plans or forbearance, to prevent delinquency.