When you're having trouble making your federal student loan payments, it can be a terrible feeling. You may be having difficulty making your payments due to job loss, military deployment, or just because you've decided to back to school. Whatever the reason, you will be considered delinquent and eventually in default if you fall behind on these loan payments, which will have serious, negative effects on your credit report, credit scores, and finances. It could even land you in court, which is unlikely to go well: student loans generally cannot be discharged in a bankruptcy. (See: Paperwork Snafu Could Make Billions in Student Loan Debt Disappear)
Thankfully, there are two different programs available that can help you to avoid these consequences: forbearance and deferment, separate programs that allow you temporarily stop making payments, or make reduced payments for a limited time on your federal student loans. In addition, some borrowers may benefit from loan forgiveness or consolidation programs.
Here, in part two, we examine the ins and outs of deferments and how to get them. For information on forbearance please see: The 6 Ways to Qualify for Mandatory Student Loan Forbearance (and How to Apply).
Forbearance vs. Deferment: What's the Difference?
The biggest difference between the forbearance and deferment is that you won't incur interest charges on some types of loans while under deferment. Loans that you don't have to pay interest on during deferment include Direct Subsidized Loans, Subsidized Federal Stafford Loans, Federal Perkins Loans, the subsidized portion of Direct Consolidation Loans, and the subsidized portion of FFEL Consolidation Loans.
However, you will still have to pay interest on the following loans, even when under deferment: Direct Unsubsidized Loans, Unsubsidized Federal Stafford Loans, Direct PLUS Loans, Federal Family Education Loan (FFEL) PLUS Loans, the unsubsidized portion of Direct Consolidation Loans, and the unsubsidized portion of FFEL Consolidation Loans.
There are seven different types of deferment requests:
In-School Deferment Request.
You may be eligible if you are enrolled at least half-time at an eligible college or career school. You only qualify if you received a Direct PLUS Loan or FFEL PLUS Loan as a graduate or professional student, for an additional six months after you cease to be enrolled at least half-time
Parent PLUS Borrower Deferment Request.
This may apply if you are a parent who received a Direct PLUS Loan or a FFEL PLUS Loan, while the student for whom you obtained the loan is enrolled at least half-time at an eligible college or career school, and for an additional six months after the student ceases to be enrolled at least half-time.
Graduate Fellowship Deferment Request.
You may qualify while you are enrolled in an approved graduate fellowship program.
Rehabilitation Training Program Deferment Request.
This can apply while you are enrolled in an approved rehabilitation training program for the disabled.
Unemployment Deferment Request.
You can qualify while you are unemployed or unable to find full-time employment, for up to three years.
Economic Hardship Deferment Request.
This may apply for up to three years while you are experiencing economic hardship or serving in the Peace Corps.
Military Service and Post-Active Duty Student Deferment Request.
You can qualify while you are on active duty military service in connection with a war, military operation, or national emergency. Or, you can receive this type of deferment if you were on active duty military service in connection with a war, military operation, or national emergency, for the 13 month period following the conclusion of that service, or until you return to college or career school on at least a half-time basis, whichever is earlier.
How to request deferment
For each of these seven types of deferment, there is a different form that you can fill out. These forms are fairly simple, and the questions you are asked are designed to qualify you for each type of deferment. Once complete, you submit your deferment request to your loan servicer.
Should you apply for forbearance or deferment?
When you're having trouble making your payments, but the problem is temporary, then it's a good idea to see if either forbearance or deferment will apply to your situation, as any option is better than delinquency or default. Deferment is preferable if you can avoid incurring interest on the type of loan you have. Otherwise, you will want to request either forbearance or deferment based on your individual circumstances.
Finally, if the problems you are experiencing aren't temporary, then you should look into an income driven repayment plan. There are plans that are available to permanently reduce your monthly payments, and even forgive your loan if it's not repaid within 20 to 25 years. Certainly, having your loan forgiven is always a good idea, but income driven loans have their own advantages and drawbacks and only apply to a very narrow group of people.
By understanding the different types of forbearance and deferment options available, and consulting with your loan servicer, you can decide which one of these programs will allow you to avoid the costly results of delinquency or default.