Understanding Student Loan Deferment: How and When To Defer Your Loans

Student loan deferment can temporarily postpone payments on your student loans, allowing you to hit pause on your bills without going into default. Most federal student loans automatically go into deferment while you're enrolled in school, but you can also request deferment after graduation if you run into financial hardship or have another qualifying reason.

Deferring student loans isn't always your best option, since interest can accrue throughout this period. Learn more about how deferment works for student loans, including its pros and cons.

What is student loan deferment?

Student loan deferment lets you postpone payments on your student loans for a certain period of time. You won't have to pay your student loan bills during a deferment, but interest might accrue during this time, depending on your loan type.

Interest won't accrue on Direct Subsidized Loans or Perkins Loans during a period of deferment. However, it will continue to add up on Direct Unsubsidized Loans and Direct PLUS Loans. If you don't pay the interest during the deferment, it will capitalize - or be added onto your principal balance - when the deferment ends.

Both federal and private student loans are typically placed into deferment while you're enrolled at least half-time in school. This means you don't have to make payments on your student loans while you're working toward your degree, and you usually have a six-month grace period after you graduate.

After graduation, though, the rules for deferment on federal and private student loans differ. There are specific guidelines for deferment on federal student loans; you might qualify if you're unemployed, on active duty in the military, or have another eligible circumstance.

Private student loan rules vary by lender, and any deferment requests are up to the discretion of the lender. Interest will generally accrue on private student loans during a period of deferment.

Types of student loan deferment

When it comes to federal student loans, there are several types of student loan deferment you might qualify for:

• In-school deferment: If you're enrolled at least half-time in an eligible college or career school, your federal loans will automatically go into this deferment. Borrowers can also get an extra 6 months of deferment when they're no longer enrolled at least half-time. Note that you can choose to make optional payments during this time if you want to get ahead on your loans.
• Graduate fellowship deferment: You can defer your loans if you're a master's or doctoral student enrolled in an approved graduate fellowship program.
• Economic hardship deferment: This type of deferment lets you postpone payments for up to 3 years if you're receiving a means-tested benefit like welfare or meet certain income guidelines. You can qualify if you're working full-time but your monthly income is lower than 150% of the poverty guideline for your state and family size. You also qualify if you're in the Peace Corps.
• Unemployment deferment: This type of deferment can span up to 3 years for borrowers who are receiving unemployment benefits or are pursuing but unable to find full-time work.
• Cancer treatment deferment: You can request this deferment while you're undergoing cancer treatment and for 6 months after your treatment ends.
• Military service and post-active duty student deferment: This type of deferment is reserved for military members who are on or have completed qualifying active duty service. It lasts until you re-enroll in school or 13 months have passed since your service and grace period, whichever comes sooner.
• Rehabilitation training deferment: This deferment is for borrowers in an approved rehabilitation training program that provides treatment for vocational, drug abuse, mental health, or alcohol abuse.
• Parent PLUS borrower deferment: Parent PLUS loan borrowers can request deferment while their child is in school at least half-time and for 6 months after they leave school or graduate. This deferment isn't automatic, though - parent borrowers will need to request it from their loan servicer or when they apply for the PLUS loan.

Who is eligible for student loan deferment?

You're eligible for student loan deferment if you qualify for one of the deferment types and hold qualifying loans, which include:

• Direct Subsidized and Unsubsidized Loans
• Direct Consolidation Loans
• Grad PLUS loans
• Parent PLUS loans
• Federal Family Education Loan (FFEL) program loans
• Perkins Loans

The government covers interest on Direct Subsidized Loans and Perkins Loans during periods of deferment, as well as the subsidized portion of a Direct Consolidation Loan or FFEL Consolidation Loan. However, interest will accrue on all other types of loans during this time.

How to apply for student loan deferment

Unless you're a parent borrower, your student loans will automatically be placed in deferment while you're enrolled at least half-time in an eligible school. But if you're seeking deferment for an alternative reason, here are the steps you'll have to take to apply:

1. Determine which type of deferment you qualify for: Review the various types of deferment to see which one applies to your situation. You could also contact your loan servicer for guidance if you have questions.
2. Fill out the form for your deferment type: You can access forms for each type of deferment on the Federal Student Aid website.
3. Gather supporting documentation: The form you fill out will indicate whether you need to provide verifying documentation. For cancer treatment deferment, for example, you'll either need your physician to fill out and sign a section of the form or provide separate documentation confirming your dates of treatment.
4. Submit your form and documents to your loan servicer: Your final step is to submit everything to your loan servicer. If you're not sure who your loan servicer is, you can find this information by signing in to your Federal Student Aid account.

Deferment vs. forbearance: What's the difference?

Both deferment and forbearance can temporarily postpone your student loans, but they have some key differences. During deferment, for instance, some loan types won't accrue interest, while all loan types accrue interest during forbearance. The other major difference is that interest capitalizes after a deferment, but it doesn't capitalize after a forbearance.

There are two types of student loan forbearance: mandatory and general. A student loan servicer is required to grant mandatory forbearance if you meet the requirements, which include serving in an AmeriCorps position and completing a medical or dental residency program, among others.

General forbearance is available for borrowers who are experiencing financial hardship or facing major medical expenses, but it's up to the discretion of your loan servicer. Forbearance periods usually span up to 12 months at a time, but you may qualify for a cumulative total of three years.

Deferment is typically the superior option to forbearance if you have subsidized loans or Perkins Loans due to the interest subsidy.

Pros and cons of deferring student loans

Deferring student loans has both pros and cons that are worth considering before you apply. On the pro side, deferment can help you through a financial rough patch, as it allows you to pause payments without having to worry about late fees or delinquency.

It's also available for a variety of circumstances, including serving in the Peace Corps, experiencing unemployment, or undergoing treatment for cancer. What's more, some types of student loans won't accrue interest during deferment, so you won't have to worry about your balance growing.

On the other hand, some student loans will accrue interest during this time, which can increase your cost of borrowing. If you don't pay that interest during your deferment, it capitalizes. You also won't be making any progress toward loan repayment, so you'll be in debt for longer. And you won't be making progress toward loan forgiveness if you're pursuing a program like Public Service Loan Forgiveness (PSLF).

Before pursuing deferment, consider alternative options for adjusting your student loan payments, such as an income-driven repayment (IDR) plan. Some IDR plans can set your payments as low as $0, depending on your income, and you'll still be making progress toward a program like PSLF.

FAQ

How long can I defer my student loans?

Depending on the type of deferment, you may be able to defer your student loans for up to three years. In-school deferment can also span the entire time you're enrolled at least half-time in an eligible school. Plus, you'll get a six-month grace period after you graduate or leave school.

Does interest accrue during deferment?

Interest accrues on certain types of loans during deferment, such as Direct Unsubsidized Loans, Direct PLUS Loans, and the unsubsidized portion of consolidation loans. However, interest won't accrue on Direct Subsidized Loans, Perkins Loans, or the subsidized portion of consolidation loans.

How does deferment affect my credit score?

Deferment won't directly impact your credit score, though it can prevent damage to your score if you're facing delinquency or default. However, your debt could increase during deferment, which could have a negative impact on your credit score over time. The amount you owe on installment loans and other credit accounts impacts 30% of your FICO score, so paying down debts and credit card balances in a timely manner helps maintain, and even improve, your credit score.