Student Loan Deferment and Forbearance: Everything Borrowers Need to Know

A student loan deferment or forbearance is a way to pause your student loan payments or reduce the amount you pay for a set period of time.

If you’re struggling to make your payments because of a temporary hardship and are worried about defaulting on your loan(s), either of these could be a good option, but both come with certain drawbacks.

But if you’re facing a financial hardship that could continue for an extended period of time, it might be more helpful to move your federal loans into an income-driven repayment plan like PAYE, REPAYE or IBR. 

In this article, we’ll review student loan deferment and forbearance, as well as dive into some pros and cons of each and explain how to proceed with an application should you decide either option is the right fit.

What is Student Loan Deferment?

Student loan deferment allows eligible borrowers to temporarily pause or lower their monthly payments.

Federal loans have clearly defined parameters when it comes to deferments, whereas private lenders may or may not offer the option to defer payments. We’ll cover specific eligibility criteria for federal deferments below.

One main difference between federal loan types when it comes to deferments is what happens to the interest that accrues during the deferment period.

You will generally not be responsible for the interest that accrues while your loan is in deferment if you have:

• Direct Subsidized Loans
• Subsidized Federal Stafford Loans
• Federal Perkins Loans
• Subsidized Direct Consolidation Loans
• Subsidized FFEL Consolidation Loans

You will have to pay the interest accrued while your loan is in deferment if you have:

• Direct Unsubsidized Loans
• Unsubsidized Federal Stafford Loans
• Direct PLUS Loans
• FFEL PLUS Loans
• Unsubsidized Direct Consolidation Loans
• Unsubsidized FFEL Consolidation Loans

Who is Eligible for Student Loan Deferment?

If you have private student loans, eligibility for deferment (and forbearance) will vary by lender, so contact your student loan servicer to explore your options.

Eligibility for deferments on federal loans is more set in stone. You may be eligible if any of the following applies:

• You’re enrolled at least half-time at an eligible college or career school
• You’ve taken out a Direct or FFEL Plus loan for a child who has returned to school at least half-time
• You are enrolled in an approved graduate fellowship program or rehabilitation training program for the disabled
• You’re unemployed or unable to find full-time employment
• You’re serving in the Peace Corps or are on active duty military service

How Many Times Can You Defer Your Student Loans?

The number of times you can qualify for a student loan deferment depends on the reason for the deferment itself. The economic hardship deferment is offered one year at a time, for a maximum of three years.

Unemployment deferments can last for six months at a time. You must reapply each time you wish to renew this option. It cannot be granted for more than three years total. Military service deferment does not have any limit.

Deferments that you receive while enrolled in courses will last until graduation, or when you fall beneath the minimum credit hours. In many cases, there will be a six month grace period before payments resume.

Can you Defer Student Loans While Still in School?

Yes. If you wish to receive a deferment on your student loans while enrolled in classes, you must be enrolled at least half-time in an approved college or career school. Half-time is usually defined as 6-8 credit hours of courses each semester.

Eligibility requirements may vary based on the loan provider and the type of loan you have. Check with your lender for more details on their specific deferment and forbearance policies. For more information about federal loans, visit the Federal Student Aid Office’s website.

Deferment vs. Forbearance

What is Student loan Forbearance?

Student loan forbearance is essentially the same thing as deferment, except that borrowers are always responsible for paying accrued interest on loans in forbearance.

Forbearance also differs in terms of who is eligible. Deferment is generally a better option if you have federal loans that will benefit from subsidized interest during your deferment period, but your situation will determine which program you’re eligible for.

Who is Eligible for Student Loan Forbearance?

As with deferments, private lenders (and the servicers they work with) can decide when and to whom they’d like to offer forbearance to, so contact your lender for more details on private loan forbearance.

For federal student loans, there are two types of forbearance: general and mandatory.

General forbearance is granted by loan servicers on a discretionary basis to holders of Direct Loans, FFEL Program loans, and Perkins Loans. A servicer may allow for a general forbearance if the borrower is facing financial difficulties, including unexpected medical expenses or a change in your employment situation.

If you’ve fallen on an unexpected financial hardship, get in touch with your servicer to see whether your situation might qualify for general forbearance.

General forbearances are granted for no more than 12 months at a time, but you may be able to request it again if you still meet eligibility criteria when the period expires.

Mandatory forbearance is when your servicer is required to grant you forbearance. It can also be granted for no longer than 12 months at a time, but you can re-apply.

You may be eligible for mandatory forbearance if:

• You are doing a medical or dental internship or residency
• Your student loan payments amount to 20 percent or more of your monthly gross income
• You are serving in Americorps
• You’re a teacher working in a capacity that qualifies you for teacher loan forgiveness
• Your loans qualify for partial repayment via the U.S. Department of Defense Student Loan Repayment Program
• You are a member of the National Guard but are not eligible for military deferment

Pros and Cons of Student Loan Deferment and Forbearance

Pro: Gets yourself some help in a time of hardship

If you’re struggling to make ends meet, a deferment or forbearance can help by pausing or lowering your student loan payments, freeing up extra funds for non-negotiable expenses like bills or payments on other types of loans.

Deferment or forbearance can also help you avoid student loan delinquency and default, which can go on your credit report and result in the loss of certain federal student loan protections (such as the option to request a deferment in the future).

Pro: Go back to school or engage in service without having to worry about monthly payments

Luckily, the government (and many private lenders) understand that completing a graduate degree or partaking in any number of service jobs can greatly reduce your ability to make monthly loan payments, and the eligibility criteria for forbearance and deferment reflect this.

Whether you’re going back to school or engaging in service or training, a deferment or forbearance can help in a big way—particularly if your income has gone to zero.

Con: Interest accrual

The biggest drawback of deferment and forbearance programs is that, in the case of unsubsidized loans, your loans will accrue interest even when you aren’t making monthly payments—so only your payments, but not your interest, are on hold. Note that this drawback does not apply to subsidized and Perkins loans.

You have a few options when it comes to paying this interest. The first and best financial choice is to pay the interest as it accrues or before the end of your deferment or forbearance.

You’ll need to contact your lender or loan servicer to find out how much you owe and how to pay it, as you won’t be making monthly payments during deferment or forbearance.

If you can’t afford interest payments while your monthly payments are on pause, the interest will be capitalized—or added to your loan principal—at the end of the of the deferment or forbearance. Other factors being equal, this means you’ll pay more over the life of the loan.

Con: Potential ineligibility for forgiveness programs

Programs such as Public Service Loan Forgiveness require borrowers to have made a certain number of qualifying monthly payments on their loans—so a deferment or forbearance can increase the amount of time it’ll take you to reap the benefits of a forgiveness program.

If you’re trying to reach the point when your balance is forgivable as soon as possible, it might be worth avoiding a deferment or forbearance.

How to Apply for Deferment or Forbearance

As we’ve discussed above, deferment and forbearance options differ across private lenders, so those with private loans should contact their lender or servicer for eligibility and application details.

For federal student loans, check with your servicer to figure out which documentation you’ll need, as this can vary by which eligibility criteria you fulfill.

Typically, you’ll need to submit a request form to your servicer, as well as supporting documentation proving that you meet eligibility requirements. Find the right forms for your situation here.

The exception is for borrowers who enroll at an eligible college or career school, as their loans are typically placed on automatic deferment. Your loan servicer should contact you once your loans have been granted deferment, so if you haven’t heard anything, it’s worth getting in touch.

Lastly, it’s important to keep making loan payments until your deferment or forbearance has been granted, as any missed payments before this point will be counted as delinquent—potentially ruining your effort to stay in good standing on your loans.