If money is tight and your student loan payments are higher than you can afford, you may be able to get assistance through federal student loan programs called deferment or forbearance. In these programs, you are allowed to stop making payments for a period of time. If you can qualify for it, deferment is a better option than forbearance.
Read on to learn what deferment and forbearance mean, why deferment is better than forbearance, and what requirements you must meet to qualify for these programs.
(To learn more, see Student Loan Cancellation, Deferment & Forbearance.)
Which Student Loans Are Eligible for Deferment and Forbearance?
Deferment and forbearance are available for federal student loans, but are usually not available for private student loans. If you are not sure what kind of loans you have, go to the National Student Loan Data System at www.nslds.ed.gov to track down your loan type.
Also, deferment and forbearance are not available if you are in default on federal student loans. If you are in default, see Student Loans: Getting Out of Default to learn about your options.
Deferment of Student Loan Payments
Under deferment, your loan payments are postponed and no interest accrues on subsidized loans (subsidized loans include Federal Perkins loans, Direct Subsidized loans, and Subsidized Federal Stafford loans). Deferment is available under several different circumstances:
- you are enrolled at least half time in a postsecondary school
- you are enrolled in an approved graduate fellowship program (your school can tell you if it is an approved program for deferment)
- you are disabled and enrolled in an approved rehabilitation training program
- you are unemployed or unable to find full time employment (this deferment is limited to three years)
- you are experiencing economic hardship (this deferment is limited to three years), or
- you are on active duty with the military, or have been on active duty within the past 13 months.
You must apply to your loan servicer to receive a deferment. Your loan servicer is the company that communicates with you about loan payments. If you don’t know how to contact your servicer, check the National Student Loan Data System at www.nslds.ed.gov.
Forbearance of Student Loan Payments
Under forbearance, your loan payments are postponed but interest continues to accrue during the period of forbearance. If you don’t pay the interest during that period, the interest may be “capitalized,” which means it is added to your principal balance.
For example, say you owe $10,000 at a 5% interest rate, receive forbearance for a year, and don’t pay interest during that time. At the end of the forbearance period you will owe $10,500. Interest will then be calculated on this larger principal amount.
Even though the terms for forbearance are not as favorable as deferment, forbearance is definitely a better option than default if you are in financial distress.
Qualifying for Forbearance
Your loan servicer determines if you are eligible for forbearance.
When the Loan Servicer May Grant Forbearance
In some cases, the loan servicer has discretion to grant forbearance or not. A loan servicer may grant forbearance if you are experiencing:
- financial hardship, or
When the Loan Servicer Must Grant Forbearance
In other cases, a loan servicer is required to offer forbearance. Forbearance is mandatory if:
- you are enrolled in a medical or dental internship or residency
- your monthly student loan payment is 20% or more of your monthly gross income (and you meet other conditions)
- you are serving in a national service position, such as Americorps, or
- you are eligible for teacher loan forgiveness, the Department of Defense’s loan repayment program, or you are in the National Guard.
Ask your loan servicer for specific details on qualifying for mandatory forbearance.
Other Options for Dealing With Student Loan Debt
If you are experiencing financial hardship, you should also consider the different repayment plans offered by the Department of Education for federal student loans. For more information, see our Student Loan Debt topic area.