Understanding Student Loan Deferment and Forbearance

Desmond Rhodes
A student sitting at a classroom desk looks off into the distance while propping her chin in her hand.
Reading Time: 3 minutes

A student loan becomes delinquent as soon as you miss your first payment. After an extended period of time, usually about 270 days, your student loans will become default and your financial hardships can become much more significant. Defaulting on your student loans may obliterate your credit score — making it virtually impossible to get a credit card or personal loan.If you cannot pay your student loans in time it is vital that you make other arrangements to avoid a default.

Student loan rehabilitation and consolidation are potential options for you to help get your finances back on track. In the event that you have other payments to make month over month, and if you have fallen upon additional financial burdens, your student loans may need to take a backseat. In these cases, student loan deferment and forbearance may be the best option for you. Read below for a comprehensive understanding of student loan deferment and forbearance, if these options are for you, and if you are eligible for these arrangements.

Student Loan Deferment and Forbearance

For most federal loans, student loan deferment and forbearance can be arranged to exonerate you from paying your student loan for an extended period of time. Under particular circumstances — unemployment, military deployment, and economic hardships — you may be able to suspend or reduce your student loans for 12 to 36 months.

Although student loan deferment and forbearance are similar, it is crucial to understand the differences to avoid student loan default. Different conditions and time limits apply to each option, and may influence whether you choose one arrangement over the other.

Student Loan Deferment

According to your circumstances, student loan deferment can be arranged with your loan servicer to postpone your payment for six-month intervals, up to three years. This can ease the burden of a payment during a period of financial stress. However, it should be understood that you should work on bettering your financial situation during this period.

Who Can Get Student Loan Deferment

Student loan deferment may be approved for people who:

  • Are enrolled in college at least half-time.
  • In a Graduate Fellowship.
  • In a rehabilitation training program.
  • Unemployed, or cannot find full-time employment while registered with a public or private employment agency.
  • Under economic hardship.
  • In active duty or other military services.

If you find yourself in one of these situations, you should consider requesting a deferment from your loan servicer.

Student Loan Forbearance

Sometimes, you won’t qualify (or may get denied) for student loan deferment. In other cases, the terms and conditions may not apply to you. In these instances, student loan forbearance may be an alternative to deference. Unlike deference, student loan forbearance only extends to 12 months, and it accrues interests on your loans. There are two types of student loan forbearance:

Discretionary Forbearance: Your loan servicer may offer you discretionary for payments in the case that you are under significant financial hardship, or are dealing with serious illness.

Mandatory Forbearance: Your lender may be legally required to grant you student loan forbearance in extreme situations in which you could potentially be evicted, or sent to debtors prison, and there is simply no chance of you making up the payments.

Who Might Need Student Loan Forbearance

Individuals who should consider student loan forbearance are people who:

  • Meet particular requirements of a medical or dental program.
  • Are in a teaching program and qualify for loan forgiveness.
  • Serve in a national service position.
  • Qualify for a partial repayment by the US Department of Defense Student Loan Repayment Program.
  • Are called into active military duty.
  • Your monthly student loan payment is 20 percent or more of your monthly income.

Each service or has their own application process for student loan forbearance. Contact your loan servicer to request forbearance,and to find out what documentation you need to apply. Remember, interest will accrue during forbearance. The interest on your loan will depend on what type of loan you have, and it’s servicer.

Are You Eligible For Student Loan Deferment or Forbearance?

If you are in any of the situations above, and depending on what type of loan you are under, you may qualify for student loan deferment or forbearance. For further information, visit the US Department of Education website. Here, you’ll have access to all of the forms necessary to start process. It is also wise to contact your loan servicer for more details of exactly how this will work.

It is imperative to understand that you should not stop payments on your student loans until you are qualified for student loan deferment or forbearance. It is up to you to request deferment or forbearance, as services will not automatically start the process for you. If you stop payment before you are approved, you may be denied, and will still have to pay your student loans on time. However, if you are approved for student loan deferment or forbearance, it may significantly improve your financial hardships.

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