Procrastinate a Bit with Forbearance and Deferment
Life happens, and not always as planned. You might find yourself out of work for a season, burdened with unexpected medical bills, or facing financial difficulties. In situations like these, affording your monthly student loan payments can be impossible.
Don’t worry. The Department of Education and your loan servicer want to be able to offer you some relief when you’re momentarily struggling to make your federal student loan payments. They don’t want you to fall into student loan default any more than you do. That’s why forbearance and deferment options exist.
Qualifying for Forbearance and Deferment to Avoid Default
You may be eligible for temporary relief from your loan servicer if you’re in a situation where you can’t pay what you owe, and if your loan meets certain requirements (e.g., in good standing). If granted, you can stop or reduce monthly payments for a period of time to avoid defaulting on your federal loans.
Forbearance vs. Deferment
When it comes to student loan forbearance vs. deferment, it’s important to note that they’re very similar. But their biggest difference in terms of interest makes deferment a little more appealing. With a deferment, you’re not responsible for paying interest that accrues on federally subsidized loans or Perkins loans but will need to pay that amount with forbearance.
Because forbearance and deferment are slightly different, there are distinct ways to qualify for them.
What Qualifies You for Deferment?
Here are some ways to qualify for student loan deferment:
- If you are unemployed or unable to find full-time employment for up to three years
- If you’re experiencing economic hardship for up to three years
- If you’re serving in the Peace Corps for up to three years
- If you are receiving cancer treatment and for six months after the end of your treatment
- If you are enrolled in an approved rehabilitation training program for the disabled
- If you’re enrolled at least half-time in college (and for those graduate or professional students with Direct PLUS or FFEL PLUS loans, this will be extended to an additional six months after you are no longer enrolled at least half-time)
- If you are a parent with a Direct PLUS or FFEL PLUS loan and your respective student is enrolled at least half-time at an eligible college (and for six months after the student’s enrollment ends)
- If you’re enrolled in an approved graduate fellowship program
- If you’re on active duty military service in connection with a war, military operation, or national emergency
- If you were on active duty military service for the reasons above for the 13 month period after the end of that service (or until you return to college on at least a half-time basis, whichever is earlier)
Most of these types of deferment will require you to submit a request to your loan servicer. You’ll also need to show them evidence or proof supporting your qualification for deferment.
The big exception to this rule is for deferment while you’re enrolled in school. Oftentimes when this happens, your loan will be placed in deferment automatically and your lender will reach out and let you know. If you don’t see that deferment notification come through, contact your school so they can inform your loan servicer of your enrollment.
What Qualifies You for Forbearance?
For forbearance, you’ll be looking at either a mandatory forbearance or a discretionary forbearance. Both types of forbearance cannot be granted for more than 12 months at a time, though you can request another forbearance once your current one expires.
Mandatory forbearances are exactly what they sound like – your student loan servicer is required to give you a mandatory forbearance if you’re eligible.
You can be eligible for a mandatory forbearance if:
- You’re serving in an AmeriCorps position for which you received a national service award
- You’re a member of the National Guard and have been activated by a governor but aren’t eligible for a military deferment
- You qualify for partial repayment of your student loans under the U.S. Department of Defense Student Loan Repayment Program
- You’re in a medical/dental internship or residency program and you meet specific requirements
- Your total amount owed each month for your student loan debt is 20 percent or more of your total gross income for up to three years
- You’re performing teaching service that would qualify you for teacher loan forgiveness
Discretionary forbearances are also interchangeable referred to as “general forbearances.” Student loan servicers make the final call when it comes to granting a request for a discretionary forbearance. Reasons that may qualify for requesting this type of forbearance include:
- Change in employment
- Financial difficulties
- Medical expenses
Other reasons may qualify you for a general forbearance as well, so long as your servicer deems them acceptable.
Is a Temporary Fix Right for You?
Student loan servicers will push you towards a forbearance or a deferment as a quick fix if you can’t afford payments. Sometimes this is in your best interest, but they won’t always tell you about better alternatives.
A big question you’ll need to ask yourself is, “Will a temporary pause in payments actually help me afford my student loans going forward?” If not, then you may need to look into other student loan solutions, like student loan forgiveness, consolidation, or refinancing.
The Key to Forbearance and Deferment
The main thing to know when going into forbearance or deferment is that you shouldn’t stop paying on your student loans until forbearance or deferment has been approved. We know sometimes that’s easier said than done. That’s why we’re here to help.
Our Student Loan Solver team can review your specific situation to see if applying for a forbearance or deferment is your best bet. Many times, a month or two of temporary relief can make a dramatic difference in the ability to continue payments. We can also help weigh the pros and cons of alternative solutions to high or unaffordable student loan payments. Give us a call for a free initial consultation with a Student Loan Advisor today.