Updated: 2020-12-23 by
When you graduate from college, you usually won't have to start paying your student loans immediately. Most student loans include an automatic grace period of at least six months. But after that grace period ends, there are just two ways to delay student loan repayment -- deferment or forbearance.
Getting a deferment or forbearance can be a life saver if you have explored options for reducing your payments and still find yourself unable to meet your financial obligations. Still, you should use these postponement tools sparingly and with a full understanding of how they work. In many cases, interest will continue to accrue during a deferment or forbearance, and this can dramatically increase the amount you will have to pay later.
Student Loan Deferment
Certain life situations -- such as unemployment or returning to school -- may temporarily excuse you from paying your federal student loans. If you qualify for a deferment, you can postpone payment on both the principal and interest of your loans. In some cases, the federal government will even pay the interest for you. In other situations, interest continues to accrue during the deferment period.
During a deferment, the government may pay the interest on:
- Perkins Loans
- Direct Subsidized Loans, and
- Subsidized Stafford Loans.
You will have to pay the interest on unsubsidized or PLUS loans. If you can, you should continue to make these interest payments during the deferment period. Otherwise, the government will add the accrued interest to the balance of your loan (this is called "capitalization") and your future payments will be higher. To see how capitalized interest can mount up and affect your loan balance, use FinAid's Cost of Interest Capitalization calculator.
Following are some common types of deferment:
- at least half-time enrollment in school
- economic hardship
- military service
- study in an approved graduate fellowship program
- study in an approved rehabilitation training program for the disabled
If you have federal Perkins loans, you may qualify for additional deferment benefits.
To qualify for a deferment, your loan can't be in default, and you must meet specific requirements for your type of loan.
For more information or to apply for a deferment, contact your loan servicer or visit the U.S. Department of Education website. If you have a private student loan, read your loan contract and contact your loan servicer to see whether you have any options for deferment.
Student Loan Forbearance
A forbearance allows you to postpone or reduce your federal student loan payments for a set period of time. It is often easier to get a forbearance than a deferment -- for example, you may qualify even if your loan is in default -- but it will most likely cost you more. Interest always accrues during a forbearance; when that interest is capitalized, your loan balance will shoot up. (As mentioned just above, you can use FinAid's Cost of Interest Capitalization calculator to see how capitalized interest can affect the balance of your loans.)
That said, forbearance can be an important tool if you are in over your head. For example, if your student loans are delinquent but not yet in default, obtaining a forbearance will stop the clock on the delinquency period. That delays default and buys you some time to work out other strategies for dealing with your loans.
You may qualify for a forbearance if:
- you are in poor health
- you are facing financial hardship
- your monthly payments are more than 20% of your monthly gross income
- you are serving in a medical or dental internship
- you are serving in a national service position for which you received a national service award
- you are a teacher and your service would qualify you for teacher loan forgiveness
- you qualify for partial repayment of your loans under the U.S. Department of Defense Student Loan Repayment Program, or
- you are a member of the National Guard and have been activated by a governor, but you don't qualify for a military defermtent.
For more information or to apply for a forbearance, contact your loan servicer or visit the U.S. Department of Education website. If you have a private student loan, read your loan contract and contact your loan servicer to see whether you have any forbearance options.
If You Don't Qualify for Deferment or Forbearance
If you're having trouble paying your loans and you don't qualify for a deferment or forbearance, you may have other options, including reducing your monthly payments. To learn more, see "What If I Can't Pay My Student Loans?"
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