Not being able to afford your student loan payments is an awful feeling. Interest and late fees can accrue, and if your loans enter default, you could face serious consequences like wage garnishment.
If you’re facing a major financial hardship, such as a job loss or medical emergency, you may be able to qualify for some relief with loan deferment or forbearance. With these options, you can postpone making payments on your loans for months or even years, without becoming delinquent on your debt.
Here’s what you need to loan about student loan deferment and forbearance.
How deferments and forbearance work
If you can’t afford your monthly payments, you’re not alone. According to Federal Student Aid, 6.1 million people had their federal loans in deferment or forbearance, as of 2019.
If you’re in danger of falling behind, entering deferment or forbearance can give you some much-needed help. However, not everyone will qualify. Whether or not you’re eligible for deferment or forbearance is dependent on the type of loans you have and your unique situation.
Federal loan deferment
With federal loan deferment, you can postpone making payments on your student loans for up to three years. If you’re eligible for a deferment, you may not be responsible for paying the interest that accrues on your loan during the deferment period. In general, you won’t have to pay interest if you have Direct Subsidized Loans, Subsidized Federal Stafford Loans, Federal Perkins Loans, or the subsidized portion of Direct Consolidation Loans.
If your loans are in repayment, you may be eligible for a federal deferment during the following time periods:
- While you’re receiving cancer treatments, and for six months after your last treatment
- While you are enrolled in a rehabilitation program for the disabled
- While you’re unemployed or unable to find full-time employment
- While you’re experiencing an economic hardship or you are enrolled in the Peace Corps
- While you’re on active duty in the military
How to apply for federal deferment
To request a federal deferment, you must contact your student loan servicer. Explain your situation and ask them to send you the necessary deferment forms. Until your deferment request is approved, keep making payments on your loans to avoid falling behind and becoming delinquent.
Federal loan forbearance
Like deferment, entering forbearance allows you to postpone making payments on your loans. However, you are responsible for paying the interest that accrues on your student loans while you’re in forbearance. You can either pay the interest as it accrues during the forbearance period, or you can allow it to accrue and be capitalized — added to your loan balance — at the end of your forbearance term.
There are two kinds of federal loan forbearance:
- General: With a general forbearance, the loan servicer decides if you can postpone your payments. They’ll take into consideration factors like medical expenses, financial difficulties, or changes in employment. To apply, complete the general forbearance request form and submit it to your loan servicer.
- Mandatory: If you meet the requirements for a mandatory forbearance, the loan servicer must allow you to postpone your payments for up to 12 months at a time. You may be eligible if:
Private student loan forbearance
While not all private student loan lenders offer loan forbearance, some do. Terms vary from lender to lender, but you may be able to postpone your payments for two or three months at a time if you are experiencing a financial hardship, such as a job loss or medical emergency. While your loans are in deferment, they will continue to accrue interest, adding to your total balance.
If you have private student loans and need to take advantage of forbearance, contact your lender directly and inform them that you can’t afford your payments due to extenuating circumstances.
How postponing payments affects your total loan cost
While a student loan deferment or forbearance can give you some breathing room in your budget, these options should only be used as a last resort. That’s because it can cause more interest to accrue on your loans, forcing you to pay back more money.
For example, let’s say you had $30,000 in federal Direct PLUS Loans at 7.08% interest and a 10-year repayment term. If you deferred your payments for 12 months, your loan balance would grow to $32,124 at the end of your deferment period. Postponing your payments would cause your loan balance to increase by over $2,000.
4 Alternatives to deferment and forbearance
Student loan deferment and forbearance can be useful options when you can’t afford your payments, but they’re not for everyone. If you’re struggling to keep up with your payments, these alternative solutions may work for you:
- Switch to an income-driven repayment plan: If you have federal loans, apply for an income-driven repayment (IDR) plan. With this approach, your repayment term is extended and your monthly payments capped at a percentage of your discretionary income. Some borrowers will even qualify for payments as low as $0.
- Request an alternative payment plan: If you have private student loans, you aren’t eligible for IDR plans. However, some lenders will allow you to enter an alternative payment plan if you’re going through a financial hardship. For example, you could make interest-only payments for a few months until you find a new job.
- Apply for loan forgiveness: If you have federal student loans, you may be able to qualify for Public Service Loan Forgiveness or teacher loan forgiveness, eliminating your debt.
- Consider student loan refinancing: If you have good credit, another option is student loan refinancing. You could qualify for a lower interest rate and you could extend your repayment term, reducing your monthly payment. Use Purefy’s Compare Rates tool to view offers from multiple lenders and get the lowest rates.
Managing your loans
If you’re struggling to keep up with your student loan payments, loan deferment or forbearance can give you the time you need to get back on your feet without falling behind on your debt. If you’ve lost your job or you are going through a medical emergency, reach out to your loan servicer right away to discuss options and come up with a repayment plan that works for you.