If you’re struggling to manage your debt, a student loan deferment may help. Deferring your loans allows you to reduce or pause payments for a set period, sometimes up to three years.
Although deferment can offer immediate financial relief, you may end up owing more over the life of the loan due to accrued interest. This guide covers the basics of deferment and other repayment alternatives, helping you decide which option is best for your particular situation.
|COVID-19 student loan payment freeze|
|As part of pandemic relief measures, all federally held student loans are automatically paused until Dec. 31, 2022. No loan payments or interest will be charged during this time. Furthermore, collections on defaulted loans will remain paused.|
What is student loan deferment?
A student loan deferment is when your loan’s monthly payments are temporarily reduced or postponed for a specified time frame.
You don’t need to make regular payments when your loans enter deferment. The deferment agreement specifies the length of time you’re allowed to pause repayment. Borrowers should note that although deferment pauses your payments, interest may continue to accrue.
For federal loans: Depending on your type of student loan, the government may cover the interest charges, such as with subsidized loans. Otherwise, you’ll need to make monthly interest-only payments to avoid capitalized interest, which is when unpaid interest is added to the total principal of the loan.
In most cases, you’ll need to apply for a student loan deferment. If you’re still in school, the deferral should happen automatically — if not, speak with a financial aid representative to ensure your enrollment status is reported accordingly. If you don’t know the name of your servicer, here’s how to track it down.
For private loans: The availability and terms of deferment vary widely by lender. Some offer the opportunity to defer if you are in a financial bind, while others do not.
You’ll want to contact the company directly. If you don’t know who your lender is, you can check with your school or request a copy of your credit report, which will have all your currently outstanding loans. See our guide to finding your student loan balance for more information.
|Deferment vs. forbearance|
Although deferment and forbearance can both pause your monthly student loan payments, each plan differs slightly:
● Deferment pauses interest for subsidized federal student loans
Additionally, deferment can last up to three years, but forbearance caps at 12 months. Check out our side-by-side comparison for more.
When to defer your student loan
Your situation should guide whether deferring student loans is a smart move. Here are some key questions to consider before you decide:
● What types of loans do I have?
Applying for deferment might be worth it if you have federally subsidized loans or Perkins loans, since these don’t accrue interest during the deferment. However, it’s often a good idea to avoid deferring unsubsidized or private loans due to the high cost of accumulated interest. Consider finding out if you can make monthly interest-only payments instead.
● Can I afford smaller payments?
Remember, deferment reduces your monthly payment to $0. However, if you can manage a reduced monthly payment (and you have federal student loans), you might want to consider an income-driven repayment plan instead.
● Is my financial situation temporary?
Deferment is meant to offer temporary financial relief. If you foresee long-term financial struggles, you might want to apply for a plan that provides more assistance. (See more below.)
Loans that qualify for deferment
If you meet the criteria, you can put any federal student loan into deferment. In addition, certain private student providers may offer payment relief plans, but as noted above, the rules and requirements vary by lender.
Federal student loan deferment
The U.S. Department of Education issues two types of Direct federal student loans: subsidized and unsubsidized. The type determines how interest accrues during the deferment period.
The government pays the monthly interest charges for the following types of deferred student loans:
- Direct/Stafford subsidized loans
- Perkins loans
- Direct consolidation loans (subsidized portion)
- FFEL consolidation loans (subsidized portion)
However, you’ll be responsible for paying the accrued interest on these loans:
- Direct/Stafford unsubsidized loans
- Direct PLUS loans
- FFEL PLUS loans
- Direct consolidation loans (unsubsidized portion)
- FFEL consolidation loans (unsubsidized portion)
Private student loan deferment
As previously mentioned, private lenders don’t offer a standardized deferment plan. However, providers may work with you if you’re experiencing financial hardship.
As with unsubsidized federal loans, most private student loans continue to accrue interest during deferment. In the end, deferring your private student loans isn’t usually the best action plan. (See below for more on alternative options.)
How to defer student loans
If you need to pause your federal student loan payments, you should contact your loan servicer to discuss options. Apart from in-school deferment, which is automatic for students enrolled in school at least half-time, you’ll need to fill out an application.
You can access forms for federal loans through your StudentAid.gov account, or reach out to your lender.
Continue making regular payments on your loans until you receive an official decision regarding deferment. Missing a loan payment could put your loans in default, negatively impacting your credit score.
Here are some situations where you can defer your loans:
- In-school student: Federal student loans are automatically deferred for current students until after a six-month grace period following graduation (or if you leave school). This only applies to students attending at least half-time or more. Contact your admissions office if you start receiving student loan payment bills while in school, so that they can correct this error. Also, know that despite the automatic grace period, you can still make payments while in school if you want to prevent interest from accruing.
- In-school parent: If you took out a parent PLUS loan for your child, you can request deferment if they’re currently enrolled at least half-time. You’ll receive the standard six-month grace period that the in-school student gets.
- Unemployment: If you’re unemployed or struggling to find a full-time job, you can request deferment for up to three years. You may need to show proof of unemployment benefits or be registered with an employment agency. Furthermore, you’ll need to renew your deferment every six months.
- Economic hardship: You can potentially claim economic hardship for up to three years. Receiving certain forms of government assistance could qualify you for this, as could an income drop below 150% of your state’s poverty guidelines. You would need to renew this type of deferment every 12 months.
- Military service: You can qualify for student loan deferment if you’re on active military duty or recently completed it. If approved, you’ll receive a 13-month grace period after your service ends or until you rejoin school on a half-time or full-time basis.
- Peace Corps: You can receive deferment for up to three years if you’re serving in the Peace Corps. You’ll have to submit the economic hardship application, although you aren’t required to reapply for the duration of your commitment.
- Cancer treatment: If you’re undergoing cancer treatments, you can submit a request to defer your student loans for the entire treatment period, plus six months following treatment.
- Additional reasons: Deferment is also available if you’re enrolled in an approved graduate fellowship program, a rehabilitation training program or if you received a Perkins loan and are working toward the Perkins student loan cancellation.
|How long can you defer student loans for?|
The longest you can defer your federal student loans is three years. With most deferral plans, you’ll have to reapply every six or 12 months.
The time frame varies among private student loan lenders, if they offer deferment at all. For example, the private lender Sallie Mae allows a 12-month deferment under particular circumstances, with the option to renew as many as five times.
Pros and cons of student loan deferment
Putting your student loan payments on pause may seem like a blessing, especially if you’re living paycheck to paycheck. However, you should also note potential downsides to deferment.
|● Prevents your student loans from going into default
● Allows you to focus on other high-priority bills
● Avoids monthly interest charges for subsidized loans during the deferment period
|● Results in extra interest on unsubsidized and private student loans
● Need to reapply for deferment every year
● Relief is may be capped at three years or less
Pros of student loan deferment
Deferring your student loans in extreme cases of hardship could help you pay other immediate bills, such as rent and electricity.
If you’re volunteering your time or serving in the military, temporarily not having student loan obligations allows you to give to your community without an additional burden on your mind.
And if you have subsidized federal student loans, you can rest even easier, since your balance won’t grow from the interest while your loans are in deferment.
Cons of student loan deferment
There are also drawbacks to student loan deferment, mainly if the federal government doesn’t subsidize your loans. This is because the interest will continue to accumulate at the regular rate before it’s added to the loan total.
Let’s say you have a $20,000 unsubsidized loan with a 4.99% interest rate on the standard 10-year payment plan. You’ll be able to enjoy no payments for the short term if you apply for a 12-month deferment. However, our calculator shows you’ll incur an extra $998 in interest at the end — which will be added to your loan’s principal balance.
Try entering your own loan details here to see how deferment might affect your balance.
Student Loan Deferment Calculator
In addition, you should be aware that student debt in deferment can affect your progress toward student loan forgiveness programs. For example, Public Service Loan Forgiveness (PSLF) requires 120 eligible payments to qualify. If you defer the loan for three months, the payments you miss during that time might not count toward the 120, even if you’re still working for a qualified nonprofit. (However, payments you would have made during the COVID-19 pandemic repayment pause will be counted toward PSLF as if they had been paid.)
Alternatives to deferment
If you decide deferring student loans isn’t the best option for you, there are several other ways you can reduce your student loan debt to make it manageable.
Work out a repayment plan
If you can’t make your minimum private student loan payment, you can approach your lender to discuss repayment options. Lenders would rather see some money than none, so they may be willing to reduce your payments or work out another solution.
Income-driven repayment plans
The government offers many income-driven repayment plans that can reduce your federal loan payments to an affordable portion of your disposable income.
You can explore the following options:
Employer payment programs
With either private or federal debt, your employer may also have a program to help you pay off your loans. Check with your supervisor or human resources department to see if they offer student loan repayment assistance.
Refinancing your student loans may be a way to help reduce your payments and, potentially, also cut the interest you pay. However, refinancing federal student loans is generally not advised, as you could lose access to federal benefits like income-driven repayment and student loan forgiveness.