How to Defer Student Loans


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  • Introduction

    • Requesting a deferment on your student loans is essentially like asking for an I.O.U. You postpone payments on your loan for a period of time, with the promise to resume payment when you are able, or when your deferment has expired. Whether you are going back to school or are coping with a loss of income, if you cannot afford your monthly loan payments deferment can save you from defaulting on your loans—a situation to be avoided at all costs.
    • Keep reading to learn whether you qualify for deferment and what questions to ask of your lender when applying for one.

  • Deferment and Forbearance

    • Keep in mind the differences between deferment and forbearance: both allow you to postpone repaying your loan, but each treats interest differently. If you have subsidized federal loans, interest will not accrue while your loans are deferred. Under the rules of forbearance, interest will accrue regardless of the type of your loan. Thus, if possible, it's better to request a deferment if you qualify.

  • Step 1: Do You Qualify?

    • Deferment policies vary between lenders, and your ability to defer your loan will depend on your particular situation.
    1. In general, borrowers are granted deferments for the following reasons:
      1. You are back in school (yes, you're a glutton for punishment), and you are enrolled at least half-time.
      2. You've received a graduate fellowship or are engaged in a higher education or medical internship.
      3. You've fallen on hard times financially.
      4. You have a physical disability that has prevented you from working.
      5. You are unemployed.
      6. You have just returned from active military service or are a student currently serving in the military.
      7. You are volunteering with a program like the Peace Corps.
      8. You are a new parent or working mother.
      9. You are teaching at a public elementary school or secondary school in a low-income area.
    2. You can see the specific requirements for each of these options on Federal Student Aid's list of deferment forms page.
    3. You may also qualify for deferment if you need more time following a grace period to start repaying your loans.
    4. Contact your lenders directly to find out exactly what your deferment options are.
    5. And your deferment options will also vary according to the type of federal loan you have (i.e., Stafford loan, Perkins loan, etc.). There are more deferment options available to Perkins loan holders.
    6. No borrower can receive a deferment if he or she is in default, meaning the loan has not been paid for a long time (usually 180 days) or the borrower has otherwise breached the contract.
    7. Note that if you do not qualify for a deferment, you may qualify for a forbearance, which is another form of postponement on your loan payments.

  • Qualifying for an Economic Hardship Deferment

    • Economic hardship deferments can be granted once per year for three years (usually you will need to reapply each year). You will qualify for an economic hardship deferment if you meet the following requirements (though you will need to prove as much with supporting documents):
    1. You have qualified for an economic hardship deferment previously under another federal loan program.
    2. You have received federal or state assistance, including food stamps or other assistance benefits.
    3. You are a Peace Corps volunteer.
    4. You meet the minimum income levels (figure out whether you meet the requirements using FinAid's economic hardship deferment calculator).
    5. You are unemployed and either receiving benefits as a result or are actively seeking employment (and can prove as much by being registered with a search agency, for example).

  • Step 2: Ask about Interest

    • When contacting your lenders, be sure to ask whether or not interest will accrue while your loan is deferred.
    1. On federally subsidized loans, interest should not accrue during a deferment. With unsubsidized and private loans, interest will likely accrue while you are not making regular payments, though it may not be charged until the end of your deferment, when it will be added in a lump sum to your principal.
    2. Even if interest accrues, you may not have to pay it during your deferment.
      • Lenders may capitalize your interest (which basically means you're paying interest on interest) at the end of your deferment period, which will further extend the term of your repayment period and will mean you've paid much more in total.
    3. If interest will accrue, you might try to make those payments so that when you enter back into repayment, your loan hasn't grown substantially.
    4. Determine your capitalized interest by using Federal Student Aid's interest capitalization calculator. Note you will need a PIN to access your individual federal loan information.
    5. Certain volunteer programs might pay the interest payments on deferred loans. Be sure to discuss your reasons for deferment with your lender to see if there are any additional possibilities for repayment you aren't aware of.

  • Step 3: Apply

    • You'll need to formally request a deferment on your loans.
    1. Find the appropriate form for your deferment request if your loans are federally backed.
    2. You may be able to download the appropriate form and fill it out online or else download it, print it, and fill it out.
    3. You may need authorization from an official who can certify that you qualify for deferment (e.g., an administrator who can verify you are teaching full-time at a low-income school).
    4. Sign and date your forms and submit them. Then be sure to follow up on your application for deferment.
    5. Contact your lender for requests for deferment on private loans. Citibank, which has been a frequently preferred lender, provides lenders with an interactive deferment and forbearance advisor that will help you determine if you are eligible to postpone payments.

  • Step 4: Keep Good Records

    • Be sure you know (and have prepared for) when your deferment period will end and you will be expected to resume regular payments.
    1. It is your responsibility and not that of your program's or your lender to keep track of your deferment status.
    2. If you have applied for deferment but have not yet received confirmation of it, do not stop making payments on your loan. Late payments can negatively affect your credit score, making it difficult to take out loans in the future, or even to apply for additional deferments.
    3. If you are nearing the end of a deferment period and your situation has not changed (if you are still struggling with an economic hardship, for example), you can reapply for up to three years.
    4. If you are nearing the end of a deferment period and you think that a couple of changes to your loan repayment plan could make a difference, see our guides: How to Choose a Loan Repayment Plan and/or How to Consolidate Student Loans.

  • Resources for How to Defer Student Loans


 


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