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Here's a closer look at deferment and forbearance.

Not being able to pay off your student loans, even the minimum amount, can be detrimental to your financial well-being in many different ways. Falling behind on payments could damage your credit score. It could also cause your loans to go into default, which means you run the possibility of having your wages garnished. All this makes taking out an auto loan, buying a car or applying for a credit card harder in the future.

You can avoid missing payments and hurting your financial future by tackling your student loan with the help of federal programs. Deferment and forbearance are just two programs that could help you when you can’t afford to pay your student loans. Here’s what they are and how to qualify.

What Are Deferment and Forbearance?

Both deferment and forbearance allow you to temporarily stop making payments or reduce your payments on your student loans without causing you to fall behind on what you owe. However, each program differs in the type of relief it provides.

Even though both allow you to halt or reduce your student loan payments, you may not be responsible for interest that accrues during deferment. It depends on the type of loan and if it’s subsidized or unsubsidized.

You’re not responsible for interest that accrues during deferment if you have the following loan types:

  • Direct Subsidized Loans
  • Subsidized Federal Stafford Loans
  • Federal Perkins Loans
  • The subsidized portion of Direct Consolidation Loans
  • The subsidized portion of Federal Family Education Loans (FFEL) Consolidation Loans

You are responsible for interest that accrues during deferment if you have the following loan types:

  • Direct Unsubsidized Loans
  • Unsubsidized Federal Stafford Loans
  • Direct PLUS Loans
  • FFEL PLUS Loans
  • The unsubsidized portion of FFEL and Direct Consolidation Loans

In forbearance, you’re on the hook for the interest that accrues on any type of loan while you aren’t making payments.

Interest that accrues during deferment and forbearance can be capitalized, or added to your principal balance, or you can pay it off as it accrues. If you have it added to your principal balance, the total amount you owe and your monthly payments may cost more. This means it could take you longer to pay back your loans.

Deferment Eligibility

Here's a closer look at deferment and forbearance.

To qualify for deferment, you’ll need to meet a few requirements.

  • You’re enrolled at least part-time and you’ve received a Direct PLUS loan or FFEL PLUS loan as a graduate or professional student. Deferment is allowed for an extra six months after you’ve dropped below half-time enrollment.
  • You are a parent who received a Direct PLUS loan or FFEL loan on behalf of a student who meets the above requirement.
  • You’re enrolled in an approved graduate fellowship program.
  • You are enrolled in an approved rehab training program for the disabled.
  • You’re unemployed or not able to find full-time work for up to three years.
  • You are going through an economic hardship for up to three years.
  • You’re in the Peace Corps for up to three years.
  • You are on active duty military service. Deferment is also allowed up to 13 months following that service or until you return to college or a qualifying school at least half-time (whichever is sooner).

Remember that even if you qualify for deferment, you might still be on the hook to pay for the interest that adds up during that deferment period, depending on the type of loan.

Forbearance Eligibility

If you’re exploring forbearance as an option, there are two different types: general and mandatory. 

General forbearance is available if you’re experiencing financial problems in affording your basic needs or medical expenses, you’ve had a recent change in employment or other reasons. It may be wise to talk to your loan provider to see if your specific situation qualifies you for general forbearance.

Mandatory forbearance only qualifies for Direct and FFEL loans. It’s available if:

  • You’re serving a medical or dental internship or residency program.
  • The total amount you owe each month for all your loans is 20% or more of your total monthly gross income (available up to three years, and qualifies on Perkins loans, too).
  • You’re serving in AmeriCorps and received a national service award.
  • Your current teaching status would qualify you for teacher loan forgiveness.
  • You qualify for partial repayment through the U.S. Department of Defense Student Loan Repayment Program.
  • You’re a member of the National Guard, but not eligible for military deferment.

Both general and mandatory forbearance can be granted for up to 12 months at a time. If you have a Perkins loan, you have a three-year cumulative limit for general forbearance. Direct and FFEL loans don’t have the same limitation, but your loan provider may have its own limitations.

Since there is a 12-month term, you’ll need to apply for forbearance each time you need it (and if your loan allows). Some loan providers may set a maximum limit on how many times you can receive general forbearance, but mandatory forbearance doesn’t have the same restrictions.

How to Apply for Deferment and Forbearance

Struggling to pay your student loans on time could result in falling behind or missing payments completely. You can avoid these mistakes by being proactive.

To find out if you qualify, you’ll need to submit a request on the U.S. Department of Education’s website. Your specific financial situation might determine which one is best for you. Most requests have their own unique form to complete; there is no general deferment or forbearance request form.

Deferment or Forbearance Alternatives

If you don’t qualify for deferment or forbearance, you may be able to access other debt assistance programs.

  • Income-Driven Repayment (IDR) Plans. These are federal student loan repayment plans that are based on your monthly income and family size. There are four IDR plans for which you may qualify. 
  • Direct Consolidation Loan. This option allows you to combine all your federal student loans into one loan. You’ll have one monthly payment rather than many different payments spread out across different loans. You may get a lower monthly payment because your new loan terms can be up to 30 years, rather than the standard 10-year repayment term.
  • Refinance. Refinancing is when you take out one new loan, pay all your outstanding loans, and then make one monthly payment to your new lender. You can refinance both federal and private student loans. Your new interest rate is based on your creditworthiness, so if you don’t have excellent credit, you could end up paying more in interest than if you didn’t refinance. Before refinancing, compare lenders to see if they offer benefits best for you.

The Bottom Line

Here's a closer look at deferment and forbearance.

Falling behind on student loan payments can hurt your financial future for years to come. You may be able to avoid that by trying out student loan assistance programs, like deferment or forbearance. While these programs are meant to help you, interest may still add up while you’re not making payments, which can potentially raise the cost of your payments.

Before deciding on either of these options, compare them with alternative plans, like income-driven repayment plans or refinancing. And remember, until you’ve been approved, continue to make minimum payments on time to avoid damaging your credit score or causing your loans to go into default.

Tips for Paying Back Student Loans

  • If you’re not sure of the best strategy for paying back your student loans, consider working with a financial advisor. Finding the right financial advisor that fits your needs doesn’t have to be hard. SmartAsset’s free tool matches you with financial advisors in your area in five minutes. If you’re ready to be matched with local advisors that will help you achieve your financial goals, get started now.
  • Paying down student loan debt can be overwhelming. However, by simply paying more than the minimum monthly payment every month, you may be able to save money in the long run. Simply aim to pay whatever you can toward the principal each month. This can help lower the interest you pay on the total loan over time. By staying on top of your student loan debt, you’ll be on the road to financial freedom.

Photo credit: ©iStock.com/zimmytws, ©iStock.com/Anchiy, ©iStock.com/MonthiraYodtiwong

Dori Zinn Dori Zinn has been covering personal finance for nearly a decade. Her writing has appeared in Wirecutter, Quartz, Bankrate, Credit Karma, Huffington Post and other publications. She previously worked as a staff writer at Student Loan Hero. Zinn is a past president of the Florida chapter of the Society of Professional Journalists and won the national organization's "Chapter of the Year" award two years in a row while she was head of the chapter. She graduated with a bachelor's degree from Florida Atlantic University and currently lives in South Florida.
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