If money is tight and your federal student loan payments are higher than you can afford, you might be able to get assistance through a federal program called deferment or 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 one of these programs.
Deferment and forbearance are available for federal student loans, but are usually not available for private student loans. If you're not sure what kind of loans you have, go to the National Student Loan Data System to track down your loan type.
Also, deferment and forbearance are not available if you're in default on your federal student loans. (If you're in default, see How to Get Out of Default on Your Federal Student Loans, as well as What Happens If You Default on Your Student Loans.)
Under deferment, your loan payments are postponed and no interest accrues on subsidized loans (subsidized loans include Federal Perkins Loans, Direct Subsidized Loans, Subsidized Federal Stafford Loans, the subsidized portion of Direct Consolidation Loans, and the subsidized portion of FFEL Consolidation Loans).
Deferment is available under several different circumstances:
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, see Who Is My Student Loan Holder or Servicer?
Under forbearance, your loan payments are postponed (or reduced) 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 requiring no payments 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're in financial distress.
Your loan servicer determines if you are eligible for forbearance.
When the servicer may grant forbearance. In some cases, the loan servicer has discretion to grant forbearance or not. A loan servicer may grant what's called a "general forbearance" if you are experiencing:
General forbearances are available for Direct Loans, FFEL Program loans, and Perkins Loans, but for no more than 12 months at a time. There's no fixed cumulative limit on general forbearance for Direct Loans and FFEL Program loans, but your loan servicer might limit the maximum period of time you can get a general forbearance.
When the servicer must grant forbearance. In other cases, a loan servicer is required to offer what's called a "mandatory forbearance." Forbearance is mandatory if:
Ask your loan servicer for specific details on qualifying for mandatory forbearance.
If you're 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 Student Loan Repayment Plans and How to Choose a Student Loan Repayment Plan.