Skip to Main Content

How Student Loan Deferment Works

If you’re struggling to make your student loan payments, a student loan deferment could give you temporary relief.

Author
By Emily Guy Birken

Written by

Emily Guy Birken

Writer

Emily Guy Birken is a Credible authority on student loans and personal finance. Her work has been featured by Forbes, Kiplinger's, Huffington Post, MSN Money, and The Washington Post online.

forbeswapo
Edited by Alicia Hahn

Written by

Alicia Hahn

Senior Editor

Alicia Hahn is a student loans editor with more than a decade of editorial experience. She has worked with major finance and lifestyle brands including Mastercard, Forbes, Care.com, The Balance, and others. When she’s not working, Alicia enjoys cooking, traveling, watching true crime documentaries, and doing crosswords.

Updated September 13, 2023

Editorial disclosure: Our goal is to give you the tools and confidence you need to improve your finances.

Read More

Featured

Repaying your student loans is usually a long process, and it’s not uncommon for borrowers to experience a tough financial period at some point during repayment. Borrowers who are struggling could temporarily pause their monthly payments through a process known as student loan deferment.

Here’s what you need to know about what student loan deferment is and how it works.

What is student loan deferment?

Deferring your student loans allows you to temporarily pause payments. You won’t owe anything for a specified number of months, and your loans will remain in good standing. Both federal and private student loans offer deferment under certain conditions, though rules vary among loan types and lenders.

The length of a federal student loan deferment varies depending on the type of deferment the borrower requests, but it can be quite lengthy. Pausing your loans due to economic hardship, for example, is limited to 12-month increments with an aggregate limit of 36 total months.

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.

Important: The COVID-19 loan payment pause was a type of automatic deferment, which paused monthly payments and interest accrual for all eligible loans in response to the economic fallout of the pandemic. This deferment expired on September 1, 2023 when interest began to accrue again. Your first loan payment will be due starting in October.

Private student lenders typically offer some forms of deferment as well, though there are often fewer options than federal loans. Private lenders may allow you to pause payments if you return to school, become unemployed, or suffer damage from a natural disaster, for example. Exact policies vary by lender, but it’s common to see maximum deferment times of 12 months.

To be eligible for student loan deferment, your loan typically must not be delinquent or in default. This means you have to continue making monthly payments on your loan until your deferment request has officially been granted.

Deferment vs. forbearance

You may see the terms deferment and forbearance used interchangeably, and they are very similar: Both allow you to pause your loans for a limited time due to qualifying reasons. But when discussing federal student loans, the major difference is how these programs handle the accrual of interest.

Federal student loans on forbearance will always accrue interest, no matter the type of debt you have. Unless you make interest-only payments during the forbearance, your student loan balance will be higher at the end than it was when you began.

However, some borrowers may not have to pay interest when their federal loans are deferred. Specifically, Direct Subsidized Loans, Subsidized Federal Stafford Loans, and Perkins Loans don’t accrue interest while on deferment.

Though other types of federal student loans (and all private student loans) accrue interest during deferment, borrowers with subsidized loans and Perkins Loans can expect their loan balance to remain the same during the deferment period.

Types of student loan deferment

There are different types of deferment, depending on the specific reason why you’re seeking payment relief. The most common types of deferment for private and federal loans include:

  • Economic hardship: Federal student loan borrowers may qualify for an economic hardship deferment if they are receiving a means-tested benefit (such as welfare), if they earn less than 150% of the federal poverty level, or if they are serving in the Peace Corps. This is granted in 12-month intervals for an aggregate limit of 36 months. Private loan lenders may be willing to provide a deferment to borrowers experiencing economic hardship, but the eligibility and requirements will vary from lender to lender.
  • Unemployment: If you’re receiving unemployment benefits or are unable to find a full-time time job, you may be eligible for an unemployment deferment for your federal student loans. The program is available in 12-month increments with an aggregate limit of 36 months. Private lenders also often offer some payment relief for borrowers experiencing unemployment.
  • Medical treatment: Borrowers undergoing cancer treatment may qualify for a federal loan deferment while they are in treatment and for six months after the treatment ends. Similarly, borrowers enrolled in a rehabilitation program for substance abuse or mental health concerns may also qualify for a federal student loan deferment while in treatment.
  • Graduate fellowship: Graduate students enrolled in an approved graduate fellowship program may be eligible for a federal loan deferment.
  • Military service: Active-duty service members can qualify for a federal deferment until 13 months after the qualifying service has ended or the borrower enrolls in an eligible school — whichever comes first.
  • In-school deferment: Borrowers may automatically qualify for in-school federal deferment simply by enrolling at least half-time at an eligible school. Parent PLUS borrowers may also be eligible for deferment if the student for whom they took the loan enrolls at least half-time at an eligible school.

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. Here are some of the benefits and drawbacks of putting your student loans on deferment:

Pros

  • 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

  • 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.

Check Out: Student Loan Interest Calculator

How to apply for student loan deferment

To apply for a federal deferment, you may need to complete a deferment request for the specific type of deferment you’re seeking. Each deferment request form is available on StudentAid.gov, and you’ll typically submit the completed paperwork to your loan servicer.

The following federal student loan types are eligible for deferment:

  • Direct Subsidized Loans
  • Direct Unsubsidized Loans
  • Direct Parent PLUS Loans
  • Direct Grad PLUS Loans
  • Direct Consolidation Loans
  • FFEL Program loans
  • Perkins Loans

The process of applying for private student loan deferment varies depending on your lender. Some lenders provide information about eligibility requirements and the application process on their website. Others don’t advertise that deferment is an option, but are willing to work with borrowers who call to ask about pausing payment during a financial hardship.

If you’re interested in deferring your private student loan, start by contacting your lender to see if it offers deferment or if there are other ways to get temporary relief.

Loan deferment alternatives

Deferring your student loan payments is a short-term solution for those struggling to make ends meet. If you’re facing a temporary problem, deferment may be the right strategy to get you some financial relief. But if your financial situation is chronic or you’re facing a permanent life change, deferment may not be the right solution for you.

There are several other strategies to explore for managing your student loan debt, including:

  • Forbearance: Though interest will always accrue on federal student loan forbearance, this option may be easier to obtain for borrowers who are not eligible for a deferment.
  • Income-driven repayment: Borrowers who need a long-term solution may want to change to an income-driven repayment plan, which lowers their monthly payments based on their earnings. Any balance still remaining at the end of the loan term can be forgiven.
  • 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: Refinancing your student loans 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.
Advertiser Disclosure
4.44.4

Credible rating

Fixed (APR)

5.48% -

Loan Amounts

$10,000 - $250,000

Min. Credit Score

680

Check Rates

on Credible’s website

View Details

4.64.6

Credible rating

Fixed (APR)

5.49% -

Loan Amounts

$5,000 - $250,000

Min. Credit Score

680

Check Rates

on Credible’s website

View Details

3.93.9

Credible rating

Fixed (APR)

5.85% -

Loan Amounts

$5,000 - $250,000

Min. Credit Score

670

Check Rates

on Credible’s website

View Details

3.83.8

Credible rating

Fixed (APR)

6.00% -

Loan Amounts

$7,500 - $200,000

Min. Credit Score

700

Check Rates

on Credible’s website

View Details

44

Credible rating

Fixed (APR)

6.20% -

Loan Amounts

$10,000 up to the total amount

Min. Credit Score

670

Check Rates

on Credible’s website

View Details

3.73.7

Credible rating

Fixed (APR)

6.34% -

Loan Amounts

$7,500 - $250,000

Min. Credit Score

680

Check Rates

on Credible’s website

View Details

4.74.7

Credible rating

Fixed (APR)

6.49% -

Loan Amounts

$10,000 - $750,000

Min. Credit Score

700

Check Rates

on Credible’s website

View Details

All APRs reflect autopay and loyalty discounts where available | LightStream disclosure | SoFi Disclosures | Read more about Rates and Terms

Meet the expert:
Emily Guy Birken

Emily Guy Birken is a Credible authority on student loans and personal finance. Her work has been featured by Forbes, Kiplinger's, Huffington Post, MSN Money, and The Washington Post online.

forbeswapo