How to Put Student Loans in Deferment

Student loan deferment offers a temporary postponement of loan payments, providing relief during specific financial or personal circumstances. While payments are suspended, interest may still accrue on the loan balance, depending on the type of loan held. Understanding the conditions under which deferment is granted and its implications for the overall loan balance is important for borrowers considering this option.

Understanding Deferment Eligibility and Types

Various federal student loan deferment options assist borrowers facing specific life events. One common type is the in-school deferment, which is typically automatic if a borrower is enrolled at least half-time at an eligible college or career school. If the deferment is not automatically applied, the student’s school can report their enrollment status to the loan servicer. For graduate or professional students with Direct PLUS Loans, an additional six months of deferment may be available after they cease half-time enrollment.

Unemployment deferment is available for those actively seeking but unable to find full-time employment, or for individuals receiving unemployment benefits. To qualify, borrowers generally need to provide documentation such as proof of unemployment benefits or certify they have made at least six attempts to find full-time work within the last six months. This deferment can be granted for up to three years.

Economic hardship deferment provides relief for borrowers experiencing financial difficulties. Eligibility often depends on factors such as receiving means-tested federal or state public assistance, serving in the Peace Corps, or working full-time with an income below 150% of the poverty guideline for their family size. Documentation for this deferment may include statements of public assistance, military orders for Peace Corps service, or income verification. This deferment also has a maximum duration of three years.

Other deferment types address specific situations, including military service, graduate fellowship programs, and rehabilitation training. Military service deferment is for those on active duty during a war, military operation, or national emergency. For graduate fellowship deferment, borrowers must be enrolled in an approved graduate fellowship program. Rehabilitation training deferment applies to those in a program designed to provide vocational, drug abuse, mental health, or alcohol abuse rehabilitation treatment.

Cancer treatment deferment is another option, allowing borrowers to pause payments during active cancer treatment and for six months afterward. This deferment requires certification from a physician.

Applying for Deferment

Once eligibility for a specific deferment type has been determined and all necessary documentation gathered, the next step involves submitting the completed application to the federal student loan servicer. Most deferments are not automatically granted and require a formal application. The application form must be fully completed with accurate personal details and supporting documentation.

The completed deferment request form and all supporting documents should be sent to the loan servicer. Common submission methods include mailing the documents to the servicer’s designated address, or in some cases, submitting through an online portal if available. It is advisable to retain copies of all submitted documents and to use a trackable mailing service for physical submissions to confirm receipt.

After submission, the loan servicer will review the application and documentation. Processing times can vary, but borrowers typically receive communication regarding the status of their request. During this review period, some loan servicers may place the account into a temporary forbearance, which can pause payments while the deferment application is being processed.

Managing Your Loans During Deferment

When a deferment is approved, the status of the loan changes, and understanding the implications for interest accrual is important. For Direct Subsidized Loans and Subsidized Federal Stafford Loans, the government generally pays the interest that accrues during the deferment period, meaning the loan balance does not increase.

However, for unsubsidized loans, Direct PLUS Loans, and unsubsidized portions of consolidation loans, interest continues to accrue during deferment. This means that even though payments are paused, the total loan balance will increase as interest accumulates daily. If this accrued interest is not paid during the deferment, it will be capitalized, or added to the principal balance, at the end of the deferment period.

Capitalization of interest increases the principal amount on which future interest is calculated, which can lead to a higher total repayment amount over the life of the loan. Borrowers have the option to make interest-only payments during the deferment period to prevent this capitalization. Regularly monitoring the loan status through the loan servicer’s online portal is advisable to track interest accrual and the remaining deferment period.

For longer deferment periods, or if circumstances change, the loan servicer may require periodic re-certification of eligibility or updated information. Compliance with such requests is important to maintain the deferment status and avoid an unexpected return to repayment.

Preparing for Repayment After Deferment

As the deferment period approaches its end, borrowers should prepare for the resumption of loan payments. It is important to note the deferment’s exact end date, as payments are typically scheduled to resume shortly thereafter. Loan servicers usually provide notifications before payments restart, outlining the new payment schedule and amount.

Borrowers should review their current repayment plan with their loan servicer to ensure it remains suitable for their financial situation. If circumstances have changed, exploring alternative repayment options, such as income-driven repayment plans, may be beneficial. Proactive communication with the loan servicer is important if there are any concerns about resuming payments, potentially avoiding delinquency or default.