Student Loan Deferment: What You Need to Know and How It Can Help You
If you’re struggling to repay your student loans, you might feel like you have nowhere to turn and no good options for stabilizing your finances. If you’re struggling to make ends meet and don’t know what to do when your payment due dates roll around, don’t panic. You still have a handful of solutions and temporary fixes available to you, including forbearance, income-driven repayment plans and deferment.
In a nutshell, deferment pauses your student loan payments for a maximum of three years—if you qualify. However, even if you qualify for student loan deferment, you should only plan to use it if:
- Your student loans are subsidized federal loans or Perkins loans.
- It’s not in your budget to make any payment on your student loans.
- You plan to restart your repayment schedule relatively quickly after the initial deferment.
If you don’t meet any of these criteria, opting for an income-driven repayment plan will likely be a healthier long-term financial decision.
Do You Qualify for Student Loan Deferment?
Getting that deferment ball rolling is relatively simple. First, you must meet specific eligibility criteria. Second, you must still have deferment time available. Typically, deferment can only add up to a total of three years.
When you’re ready to apply, you must retrieve, fill out and send in the appropriate application to your student loan servicer. In addition to your application, they might also require other documentation proving your eligibility, such as proof of any unemployment benefits.
Types of Student Loan Deferment
There are several different types of student loan deferment that you might be eligible for. The most common types of deferment are:
- In-School Deferment: This allows you to pause your loan payments while you’re enrolled in an eligible higher-education program, as well as six months after you leave. This deferment stays in effect for as long as you are enrolled at least half-time.
- Unemployment Deferment: You qualify for this deferment if you’re unemployed and receiving unemployment benefits or seeking full-time employment at an employment agency. You can get up to 36 months of deferment, as long as you reapply every six months.
- Economic Hardship Deferment: You can qualify for this deferment if you are receiving any state or federal assistance, earning a monthly income of less than 150% of your state’s poverty guidelines or volunteering in the Peace Corps. You can receive up to 36 months of deferment but must reapply every year if not in the Peace Corps.
- Military Deferment: As long as you’re on active duty and your service is related to war, military operation or national emergency, you’re eligible for this deferment. You can also use it 13 months after your service ends or until you return to school.
- Cancer Treatment Deferment: If you’re being treated for cancer, you can request deferment during your treatment period and up to six months after.
Not sure that you qualify for any of these deferments? A handful of other types of deferment are available if you are:
- Enrolled in an approved graduate fellowship program.
- Attending an approved rehabilitation program for the disabled.
- Working toward Perkins loan forgiveness.
If you borrowed on federal student loans before July 1, 1993, additional deferment options are available to you. Many private lenders also offer deferments if you’re in school or the military. You should contact your lender directly to find out if you qualify and apply.
When Is Deferment Not Your Best Option?
If you have private or unsubsidized federal loans, deferment should not be your first choice. Private and unsubsidized loans accrue interest during deferment, and that unpaid interest gets added to your loan balance when you restart repayment. That just leaves you in a worse place than when you started the deferment.
However, deferment is usually a better choice than forbearance, as you will always be required to pay interest during forbearance.
Keep in mind that any additional costs that come with deferment might be better than having your wages garnished or losing your tax refunds due to defaulting on a student loan.
Now that you’ve learned about deferment, explore your other options for pausing or lowering your student loan payments before making a decision. Forbearance and income-driven repayment plans are your other options, and learning more about them can help you decide which one is best for you and your long-term financial health.