Roughly 44 million Americans have student loan debt and 33% have been late making a payment during the past 12 months, according to the Global Financial Literacy Excellence Center at the George Washington University School of Business.
If you're among those struggling to make payments, you might want to see if you're eligible to defer your student loan payments.
Eligibility is based on circumstances that include:
- Being unemployed
- Enrolled back in school
- On active duty military service
- Financial hardship
No matter the circumstance, you will need to discuss a deferment with your loan servicer, apply for deferment, and keep making payments on your student loan until the deferment is approved. If you have a federal loan and you are having trouble making on-time payments, you may be eligible for a deferment or forbearance.
What Is the Difference Between a Deferment and Forbearance?
The difference between a deferment and forbearance is that with a deferment, you may not have to pay the interest on certain types of federal loans during that deferment period. A deferment lets you postpone payments on your loan and the interest doesn't increase on a subsidized federal loan.
Forbearance is when your monthly student loan payment is briefly suspended or reduced, but the interest still adds up. During a forbearance you are responsible for paying the interest that builds up on all types of federal student loans. You can learn what the eligibility for deferment and eligibility for forbearance is on the Department of Education website.
What Student Loans Can I Defer?
You can defer payments on subsidized loans and subsidized consolidation loans and they will not grow additional interest. However, for unsubsidized Stafford loans, PLUS loans, SLS loans, or unsubsidized consolidation loans, interest will accrue during the deferment period.
If you are responsible for paying the interest on your student loan during a deferment or forbearance, you have a choice of paying the interest as it builds or allowing that interest to grow. If you choose the latter, it will be added to the total of your loan amount borrowed at the end of the deferment or forbearance. If you don't pay the total amount you have to repay, the length of your loan could be higher.
|During deferment, you are generally NOT responsible for paying interest that accrues on:||During deferment, you ARE responsible for paying all interest that accrues on:|
|Direct Subsidized Loans||Direct Unsubsidized Loans|
|Subsidized Federal Stafford Loans||Unsubsidized Federal Stafford Loans|
|Federal Perkins Loans||Direct PLUS Loans|
|The subsidized portion of Direct Consolidation Loans||Federal Family Education Loan (FFEL) PLUS Loans|
|The subsidized portion of FFEL Consolidation Loans||The unsubsidized portion of Direct Consolidation Loans|
|The unsubsidized portion of FFEL Consolidation Loans|
|Source: Department of Education|
How Are You Eligible for Forbearance?
There are two types of forbearances—General and Mandatory—that decide the type of forbearance that you may be eligible for.
General forbearance is when your loan provider decides your request for a general forbearance. You can request a general forbearance if you are can't make your monthly loan payments because of the following:
- Financial difficulties
- Medical expenses
- Change in employment
- Other reasons acceptable to your loan servicer
General forbearances are available for Direct Loans, Federal Family Education Loan (FFEL) Program loans, and Perkins Loans. If approved, forbearances only last for 12 months at a time, and if needed, you may request another forbearance.
Mandatory forbearance has eligibility requirements from your loan provided before they approve the forbearance. You may be eligible for a mandatory forbearance if:
- You are serving in a medical or dental internship or residency program.
- Your monthly student loan payment accounts for 20% of total monthly income
- You are serving in an AmeriCorps position and you received a national service award.
- You are a teacher and qualify for teacher loan forgiveness program.
- You qualify for partial repayment of your loans under the U.S. Department of Defense Student Loan Repayment Program.
- You are a member of the National Guard and have been activated by a governor, but you are not eligible for a military deferment.
Mandatory forbearances last only 12 months at a time and if you continue to meet the eligibility requirements for the forbearance when time period expires, you can request another mandatory forbearance.
If you are having a hard time paying your student loans then a deferment or forbearance may be right for you as a short-term solution. Another option to consider is an income-driven repayment plan that is based on your income and family size.
Always contact your loan servicer immediately if you are having trouble making your student loan payments.
You want to make sure you understand the type of loan that you have and whether a deferment or forbearance is best for you. If you do run tough times financially, contact your student loan provider to discuss payment options.