Student loan deferment and repayment options

If you’re looking for relief from student loan repayments, you may have options. Student loan deferment might be one of them. It allows eligible student loan borrowers to temporarily pause their monthly payments. But it’s important to remember that the debt isn’t eliminated, and interest may still accrue.

Keep reading to get a closer look at how student loan deferment works, what borrowers should know about the process and alternatives to deferment.

Key takeaways

• Student loan deferment allows borrowers to temporarily pause their monthly payments if they’re in a “short-term financial bind.”
• School enrollment, economic hardship or unemployment, cancer treatment, military service and rehabilitation are circumstances that might make someone eligible for federal student loan deferment.
• Depending on the type of student loan, interest could still accrue during loan deferment. And that interest would add to the total amount a borrower owes on the student loan.
• There are other ways to handle repayment concerns, like income-driven repayment plans or student loan consolidation.

To receive federal student loan deferment, borrowers can typically notify their loan servicer and submit a form found on the Federal Student Aid website. Additional documentation might be needed, depending on the type of deferment. Students who are enrolled in school at least part time may be automatically approved for student loan deferment.

During the deferment period, borrowers might still be liable for accruing interest. As the interest continues to grow, the total amount a borrower pays will increase.

Whether loans accrue interest during the deferment period often depends on the type of student loan. Federal loans that continue accruing interest during deferment include:

• Direct unsubsidized loans
• Unsubsidized federal Stafford loans
• Direct PLUS loans
• The unsubsidized portion of direct consolidation loans
• The unsubsidized portion of federal family education consolidation loans

Student loan deferment for private loans is dependent on the lender, and qualifications can vary. Some lenders may even charge additional fees for this service.

Although private lenders aren’t required to offer deferment options, many do. Private loan borrowers should contact their lenders early in the repayment process to learn about deferment options.

According to Federal Student Aid, a borrower can qualify for student loan deferment in certain circumstances.

Federal student loan borrowers typically receive automatic deferment while enrolled in an eligible undergraduate, graduate or professional school. They must be enrolled at least half time to qualify. 

Deferment often lasts until the student is no longer enrolled in a program. But if the student has a Direct PLUS loan, they may qualify for an additional six months of deferment after being enrolled.

For individuals currently facing economic hardship or unemployment, loan deferment may be an option. An economic hardship or unemployment deferment is offered for up to three years.

Qualifications may include:

• Receiving state unemployment benefits
• Receiving temporary assistance like welfare
• Working full time with an income below 150% of the poverty guidelines for your state
• Serving in the Peace Corps

Borrowers undergoing cancer treatments may qualify for loan deferment during treatment and for six months after.

Active-duty military service members may be eligible for deferment during war, military operations or national emergency. This deferment could be followed by a 13-month grace period or end if the borrower reenrolls in an eligible school at least part time.

A borrower may qualify for deferment while enrolled in a rehabilitation treatment program. Qualifying programs might focus on alcohol and substance abuse or mental health treatment.

While deferment might be a helpful option for borrowers in certain situations, there are costs and alternatives to consider. If you’re thinking about deferring your loans, here are a few questions to ask:

• What type of loan do I have? If you have a loan that likely won’t accrue interest during deferment, such as a federally subsidized or Perkins loan, deferment may be right for you. But if you have an unsubsidized, private or other type of loan that continues accruing interest, it’s worth considering that added cost. If you’re not sure, you should contact your loan provider to confirm whether you will continue to accrue interest during deferment.
• Will my current situation end soon? If your current situation is temporary, deferment could help you get through it. But a more sustainable plan may be needed for ongoing circumstances.
• Can I afford a reduced monthly payment instead? While deferment can help in the short run, it’s usually not intended to be a long-term solution. It might be possible to make lower monthly payments instead. Again, you should contact your loan provider to see if this option is available given the terms of your loan.

Before applying for deferment, consider talking to your loan provider. It may be able to find a way for you to continue making payments that fit your budget.

Although deferring your loans may help you reduce or eliminate your payments for a certain amount of time, it’s not the only choice you have. Here are a few other options for managing payments:

Federal IDR plans offer reduced payments that can be more affordable depending on the borrower’s income and family size. They could be a helpful solution for borrowers with long-term circumstances. 

For some borrowers, IDR plans could mean that if the loan isn’t fully paid off within 20 to 25 years, it may be eligible for forgiveness. 

For borrowers juggling multiple federal student loans, a direct consolidation loan can help lower monthly payments, secure a fixed interest rate and access forgiveness options. It’s free to apply.

However, only federal loans—not private—can be consolidated with a direct consolidation loan. And the length of time and amount of interest paid may increase.

Private loan borrowers could check with their current lender for consolidation and refinancing options—or shop around with other lenders.

Forbearance is an alternative that can help those who may not qualify for deferment. Forbearance usually places a borrower’s loan payments on pause for up to 12 months.

While forbearance works similarly to deferment, there’s a distinction: Interest accrues during forbearance, no matter the loan type. The accrued interest is added to the total loan amount at the end of the forbearance period.

Typically, student loans that are currently under a deferment or forbearance won’t count toward forgiveness. Once a borrower resumes making payments, forgiveness like public service loan forgiveness or income-driven repayment forgiveness might be an option.

Here are a few frequently asked questions about student loan deferment:

It may be difficult to make the monthly student loan payments, especially when unexpected situations arise. For some borrowers, student loan deferment could help by temporarily pausing monthly payments, but it’s important to consider whether the potential costs outweigh the benefits.

But deferment may not be right for everyone. An IDR plan or loan consolidation may be better suited to your needs. For more information on restarting payments, visit the Federal Student Aid site.