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Editor’s note: In response to the coronavirus national emergency, interest rates on federally-held student loans have been reduced to 0% through Sept. 30, 2020, and borrowers have the option of suspending their payments for six months without accruing interest. During the temporary relief period, servicers who collect payments on federal student loans have been ordered to grant forbearance when requested, and the Department of Education has suspended “involuntary collection” on defaulted loans including garnishment of wages, tax returns or social security checks through Sept. 30.
Student loan deferment can help you catch a break on student loan payments during a period of financial hardship or other circumstance. Hitting the pause button on payments will pause interest in some cases, but not all.
Here are examples of when deferment makes the most sense:
- You’re temporarily struggling with student loan payments, but expect the situation to resolve in three years or less
- You’re back in school at least half-time, are actively serving in the U.S military, Peace Corps or AmeriCorps, or in a graduate fellowship program
- You have Direct Subsidized Loans, Subsidized Federal Stafford Loans, or Federal Perkins Loans (other loans are eligible, but might still accrue interest during deferment)
Here’s everything you should know about student loan deferment and whether it’s right for you:
- How student loan deferment works
- When student loan deferment might make sense for you
- Pros of student loan deferment
- Cons of student loan deferment
- How student loan deferment compares to other repayment plans
- How to defer student loans
- What you can do if you’re rejected for student loan deferment
How student loan deferment works
The first step in student loan deferment is making sure you’re eligible. You’ll apply for deferment through your loan servicer and will use their form to apply. Here are the requirements for common student loan deferments due for financial reasons:
- Economic hardship: You may qualify if you’re receiving government assistance or earn less than 150% of your state’s poverty line can get benefits for up to 36 months.
- Unemployment: Those receiving unemployment benefits or are seeking full-time work may qualify for up to 36 months.
There are other deferments as well when you meet certain criteria. Students, military members, and others may be able to defer under one of these circumstances:
- In-school: If you’re back in school at least half-time, you should automatically get a deferral for the duration of your education. If that doesn’t happen, contact your school’s financial aid office. Approved graduate fellowship programs also qualify.
- Military: Active duty military in connection with a war, military operation, or national emergency may qualify for a deferment. This lasts up to 13 months after the conclusion of active duty service.
- Volunteer programs: Joining the Peace Corps technically counts as an economic hardship deferment for up to 36 months.
- Rehabilitation training: If you’re in an approved rehabilitation training program for the disabled, you can defer payments.
- Cancer treatment: You can get deferment during treatment for cancer and up to six months after treatment ends.
Parents may be able to defer payments for Direct PLUS Loans or FFEL PLUS Loans if the student goes back to school at least half-time.
When student loan deferment might make sense for you
Sometimes it’s easier to understand how deferment works by seeing it in action. Here are some examples of when student loan deferment could make sense:
- Unemployed: You were laid off from a job and collect unemployment. While on the hunt for a new job, you can defer student loan payments. Once you find a new job, you’ll go back to your regular payment schedule.
- Peace Corps: After graduation, you decide to join the Peace Corps to make the world a better place. While on a 24-month assignment across the world, you put payments on hold with an economic hardship deferment.
- Military: A major disaster meant your National Guard unit was called up. While serving for a few months, your regular paychecks stop coming in. You don’t have to make student loan payments while deployed, however, thanks to the active military deferment.
- In-school: After a few years in the workforce, you decide to go back to school for a graduate degree. Your student loan payments pause when you start your first semester.
- Perkins loan forgiveness: If you’re working toward forgiveness on a Federal Perkins Loan, you may be able to defer payments.
Pros of student loan deferment
- Temporarily pauses student loan payments
- Qualifying loans don’t accrue interest during deferment
- Gives you a break while you get back on your feet
Cons of student loan deferment
- Some federal student loans still accrue interest
- Not a long-term solution for people struggling to make payments
- Must reapply to keep deferment in some situations
How student loan deferment compares to other repayment plans
If you’re having trouble with your student loan payments, deferment isn’t your only option. Here’s a comparison of your other options if you don’t qualify or want something long-term.
|Term duration||Interest||Who qualifies||Affects credit score|
|Deferment||Up to 36 months||May or may not accrue |
(depends on the type of loan)
|Forbearance||Up to 12 months at a time||Accrues during forbearance||Some borrowers|
|Income-driven repayment (IDR)||Life of loan as long as you qualify||Possible interest savings||Most borrowers||No|
How to defer student loans
Student loan deferment is a relatively straightforward process if you qualify. In most cases, you will work with your loan servicer to start a student loan deferment. Here’s how to get started:
- Go to the Student Aid website and download the appropriate application.
- Fill out the application and gather any additional required documentation.
- Send the completed application to your loan servicer for approval.
- While waiting to hear back, continue your regular student loan payments as scheduled.
- Reapply or recertify your deferment as required. Don’t miss a deadline or your deferment could end.
- When your deferment period ends, resume payments as scheduled.
What you can do if you’re rejected for student loan deferment
However, if you’re struggling to pay back your student loans, an income-driven repayment plan might be a better choice. You can also consider consolidating or refinancing your student loans. This can sometimes simplify and lower your monthly payments.