Student Loan Deferment: What It Is, How It Works

Student loan deferment lets you temporarily pause your monthly payments for up to three years, providing breathing room during specific life circumstances. If you’re returning to school, serving in the military, or facing economic hardship or illness, student loan deferment offers financial relief without canceling your loan. 

What is student loan deferment?

Federal student loan deferment allows borrowers to temporarily stop making monthly payments on their student loans, typically for a maximum of three years. If you’re enrolled in school at least half-time, you may qualify for automatic deferment. 

You won’t be required to make payments during the deferment period, but interest may still accrue. That means you may end up with a larger student loan balance when the deferment period ends and repayment begins. 

Types of federal student loan deferment

You may qualify for a deferment on your federal student loans under a variety of circumstances. Each has specific eligibility requirements and application forms.

In-school deferment

In most instances, if you’re enrolled in an eligible college or career school at least half-time, your loan will be automatically deferred. Your loan servicer should notify you. If you don’t receive an automatic deferment, contact your school so they can update your loan status.

If you’re a graduate or professional student who borrowed a grad PLUS loan, you’ll qualify for an additional six-month student loan deferment if you drop below half-time enrollment. 

Cancer treatment deferment 

You may qualify for this deferment while receiving cancer treatment and for six months after your treatment ends. To apply, you can fill out the Cancer Treatment Deferment Request form. You’ll need to provide certification from a physician confirming the treatment and details like the expected start and end date of treatment.

Economic hardship deferment

You can use an economic hardship deferment for a maximum of three years. You can qualify for this type of deferment if: 

• You’re receiving public financial assistance, such as Temporary Assistance for Needy Families (TANF).
• You’re employed full-time but don’t earn above minimum wage or 150% of the poverty guideline for your family size and state of residence (whichever is greater).
• You’re serving in the Peace Corps.

Unemployment deferment

You may qualify for this deferment for up to three years if you’re unemployed and receiving unemployment benefits, or if you’re looking for a job and can’t find one. To apply, you’ll need to fill out an Unemployment Deferment Request form, which asks for verification of your unemployment status and benefits. 

Graduate fellowship deferment

Borrowers who are enrolled in an approved graduate fellowship program may be eligible for this deferment. Graduate fellowship programs generally provide financial support to doctoral students (and sometimes, master’s degree candidates) for graduate education and research. Fill out the Graduate Fellowship Deferment Request form to apply. 

Military service and post-active duty student deferment

You may be eligible for a military service and post-active duty deferment if you’re an active-duty military service member during war, a military operation, or national emergency. 

You may also qualify if you’ve completed active-duty service and the grace period has passed. This deferment ends when you re-enroll at least half-time in an eligible college or career school, or 13 months after you’ve completed active-duty service and any applicable grace period (whichever is earlier).

Parent PLUS borrower deferment

Parents who’ve received a parent PLUS loan may qualify for this deferment, as long as the student they borrowed for is enrolled at least half-time in an eligible college or career school. Parent PLUS borrowers may also receive a student loan deferment for at least six months after the student drops below half-time enrollment. 

Rehabilitation training deferment

Borrowers enrolled in an approved rehabilitation training program may receive this deferment. The program must provide training on drug abuse, mental health, or alcohol abuse rehabilitation treatment. You can apply using the Rehabilitation Training Deferment Request form.

Private student loan deferment

Private lenders don’t have to offer student loan deferment, but most offer some form of deferment or payment relief if you’re enrolled in school, unemployed, or serving in the military. If you have a private student loan, check with your loan servicer to see what deferment options are available. 

Just like most federal loans, interest accrues on private student loans during the deferment period and gets tacked on at the end. You can reduce your financial burden by making interest-only payments during that time.

Pros and cons of student loan deferment

Student loan deferment isn’t the right choice for every borrower, and it does come with trade-offs. 

Pros of deferment

• Temporary relief during difficult times: Not having to worry about your student loan payment can help you rebuild after a financial setback or focus on getting better after a health problem.
• Protection from delinquency and default: If you’re struggling to afford your debt, deferment ensures that you won’t miss any payments and become delinquent or go into default.
• Ability to focus on new opportunities: Pausing your payments while you’re in school, working for the Peace Corps, or deployed as an active service member means you can put your focus on your current opportunities, rather than worrying about your student loan payments.

Cons of deferment

• Accrual of interest: While federal subsidized loans and Perkins Loans don’t accrue interest during deferment, all other federal and private student loans do. For example, a borrower with a $20,000 student loan with a 5.50% interest rate will accrue nearly $1,500 in interest over a 12-month deferment period.
• Increased loan balance: If interest accrues during deferment, it’ll likely capitalize when your payments restart. This means the accrued interest will be added to your balance — and you’ll essentially begin paying interest on your interest. You can avoid capitalization by continuing to make interest-only payments while your loans are paused.
• Uncertain eligibility: Deferment is not guaranteed, and your eligibility may depend on your lender’s discretion. This is especially true for private student loan deferment.

Should I defer my student loans?

In some instances, deferring your student loans may be a smart move, especially if you’re not earning an income. For many students, taking advantage of automatic deferment while they’re in school and during the six-month grace period after graduation is a no-brainer.

Still, student loan deferment isn’t for everyone. It can put a strain on your finances, especially when payments resume. You may incur thousands of dollars in extra interest, meaning your loan may cost more in the long run.

However, deferment could make sense in the following situations: 

• You have subsidized federal loans or Perkins Loans — interest doesn’t accrue on these loans during deferment. Interest does accrue on unsubsidized federal loans.
• You can’t currently afford to make any payments on your student loans.
• You’re able to start repayment relatively soon.

How to apply for deferment

Some federal student loan deferments occur automatically, as is the case if you enroll in a graduate program or otherwise return to school. Other times, you’ll need to request a deferment yourself.

To apply for federal student loan deferment, you must:

• Specify the type of deferment you’re requesting.
• Fill out the form for that deferment.
• Gather the necessary documents that show you meet the eligibility criteria.
• Submit the completed form and documents to your federal student loan servicer.

If you have private loans, contact your loan servicer to discuss deferment options.

Alternatives to deferment

Deferment isn’t your only debt relief option. Here are some alternatives worth considering: 

• Forbearance: Similar to deferment, loan forbearance lets you reduce or temporarily stop payments. The main difference is you still have to pay all of the interest that accrues, regardless of your loan type. Forbearance may benefit you if you’re dealing with financial hardship but don’t qualify for deferment.
• Income-driven repayment (IDR) plans: Applying for an income-driven repayment plan may be a better solution than deferment in the long run. IDR plans set your payments based on your income and family size. In some cases, you may pay nothing. IDR plans also offer loan forgiveness if your balance isn’t paid off in 10 to 25 years, depending on the plan. Only federal student loans are eligible for IDR. 
• Employer repayment programs: Employers are increasingly offering student loan assistance as a standard benefit. These programs typically offer a flat monthly amount or match the employee’s loan payments up to an annual and lifetime maximum. See if your employer is willing to add this, or look for a new job at a company that helps pay off your loans.
• Refinancing: A student loan refinance could result in lower interest rates, a lower monthly payment, or a lower lifetime cost of your loans. You’ll need good credit to qualify for competitive rates, or a cosigner with strong credit to include in your application. However, federal loan borrowers who refinance will lose all federal protections, including income-driven repayment, forgiveness opportunities, and future deferment options. Make sure you won’t need these perks before taking action.

Frequently asked questions

What’s the difference between deferment and forbearance? 

Both deferment and forbearance allow you to temporarily pause loan payments. However, interest doesn’t accrue on federal subsidized loans and Perkins Loans during deferment. With forbearance, interest accumulates regardless of loan type. Unlike deferment, forbearance generally isn’t limited to specific circumstances. Deferments are granted for a maximum of three years; federal loans can be in forbearance for no more than 12 months at a time.

Is it better to defer student loans or request a forbearance? 

It depends on your situation and loan type. Deferment is generally a better option if:

• You have subsidized federal student loans or Perkins Loans.
• You’re unemployed or dealing with significant financial hardship.
• You’re facing long-term financial difficulties. 

Forbearance may be best for you if:

• You don’t qualify for deferment.
• You have private or unsubsidized federal loans.
• Your financial challenge is temporary.

Does deferment hurt your credit score? 
No, student loan deferment doesn’t impact your credit score. However, missing payments or becoming delinquent on your loans before your deferment request is approved could adversely affect your credit.

What are the downsides to deferring a loan payment?

Not everyone will qualify for deferment. Eligibility is limited to specific situations, such as economic hardship, military service, unemployment, or at least half-time enrollment in school. You can only defer your payments for up to three years, which may not be long enough for your situation to change. Additionally, interest may accrue during deferment, increasing your overall loan balance and straining your finances when payments resume.