What is Student Loan Deferment?

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If you qualify, you can delay repaying your college debt

What is Student Loan Deferment?

You can defer student loan payments to stop paying your loan and reduce the amount that you pay up to three years in certain cases. Federally subsidized loans do not accrue interest during the deferment period. The government pays the interest. Unsubsidized loans do accrue interest and this is added to the amount due at end of deferment period.

Deferment is considered temporary. You should consider an income-driven payment (IDR) plan if you are unable to repay your student loans in the next three years. This article does not include any special regulations regarding the COVID-19 pandemic.

Do You Have to Defer Student Loan Payments

The following questions should be asked when deciding whether or not to defer student loans:

Are federal loans or Perkins loans subsidized? The deferment period does not allow interest to accrue on federally subsidized walmart bakery or Perkins loans. If you do not pay the interest while in deferment, any unsubsidized federal loans and private loans will accrue.

Are you able to afford a lower loan payment? Deferment is a way to get some breathing space until you start paying again. An IDR plan might be more suitable if you require a longer-term lower payment.

Can I make my student loan payments again soon? Deferment is a great way to overcome a temporary financial bump. Deferment is not an option if you can’t see a way to pay down the debt.

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You are eligible for a student loan deferment

You cannot simply stop paying your student loans or declare yourself in deferment. To qualify, you must work with your lender or loan servicer and in most cases, file an application.

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The lender or walmart bakery servicer will review your application and let you know if additional information is required. They will also tell you if you are eligible. While you wait for a decision, it is important to continue paying your loans on time. Failure to do this could lead to loan default and serious credit damage.

Federal Student Loan Deferment

Federal student loan deferments usually require you to apply. If you are at least half-time, the in-school deferment is an automatic type. You will need to apply if you feel you are eligible for a deferment on the basis of any other categories.

Go to the U.S. Department of Education’s Federal Student Aid Repayment Forms website and click on Deferment. You can then download an application for the type of Deferment you believe you are eligible for.

Private Student Loan Deferment

You will need to contact your lender to defer private student loans. Many lenders offer some type of relief or deferment if you are currently enrolled in school or serving in the armed forces. Many offer deferment to those who are experiencing economic hardship.

Like unsubsidized federal loans in many cases, private loan deferments come with accrued interest which capitalizes at the end. This can be avoided by paying the interest in its entirety.

There are many types of federal student loan deferment

These deferment options are available for federal student loans. As mentioned, there are also payment relief options offered by private lenders. However, the rules and requirements for each lender will vary.

Deferment for Students in-School

This is the only federal deferment that can be applied automatically. This deferment comes with the condition that you attend school at minimum half-time.

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Your loan will be on pause for six months if your student loan is subsidized or not. PLUS loan holders must repay their PLUS loans as soon as possible after they graduate.

If you do not receive an automatic deferment from your school, please ask your admissions office to forward your enrollment information to the loan servicer.

Parent Deferment in-School

You can also request deferment if you are a parent who has taken out a Direct PLUS/FFEL PLUS loan and your student is enrolled at least 50%.

The grace period of six months for students who have been granted deferments is the same as that given to students. Both types of in-school deferment are available without a time limit.

Deferment of Unemployment

If you are unemployed or unable to find work, you can request deferment of up to three years. You must either be receiving unemployment benefits, or looking for full-time employment by registering with an agency. This deferment must be reapplied every six months.

Economic hardship deferment

If you are eligible for state or federal assistance (SNAP or TANF), economic hardship deferment can be granted for up to 3 years. If your monthly income falls below 150% of the poverty guidelines in your state, you can apply for deferment. This deferment must be reapplied every 12 months.

Peace Corps Deferment

If you are serving with the Peace Corps, you can also get a deferment for up to three years. While Peace Corps service can be considered as an economic hardship, you do not have to reapply for it during the deferment period.

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Military Deferment

You may be eligible for student loan deferment if you are serving active duty in the military, in connection to a war, or military operation. This could include a grace period of 13 months after your service ends or until you return to school at least half-time.

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Deferment of Cancer Treatment

You can ask for deferment of student loan debt if you are diagnosed with cancer. This is valid during treatment as well as six months after the end of treatment.

Other deferment options

You may still be eligible for one or more of these types of deferment even if you aren’t eligible for any of the listed.

If you are enrolled in a program that is approved, graduate fellowship deferment

If you are enrolled in a recognized rehabilitation training program, you can defer your rehabilitation training.

Perkins loan forgiveness deferment for those who have received Perkins loans and are working towards the cancellation

You may have additional/enhanced options for deferment if your loan is pre-July 1, 1993 Direct or FFEL Program. Contact your crooks and liars servicer for details.

Calculating Student Loan Interest

The interest calculated for student loans is different to other loans. Student loans have interest that accrues each day, but it is not compounded (added on to the balance). Instead, the monthly payment you receive includes both the interest for the month and a portion the principal.

Here’s an example:

  • Total loan amount: $20,000
  • APR = 7%
  • Daily interest rate (APR divided 365) = 0.7% / 365 = 0,019 or 0.19%
  • Daily interest amount = $20,000 x 0.19 = $3.

The daily interest amount decreases as you make monthly payments on your loan. The daily interest amount for a crooks and liars in deferment is the same as the balance, but the interest is not capitalized (added on to the loan) until repayments begin.

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