Deferring Student Loans: Is It for You? (& How to Do It)

As you pay off your student loans, you may experience some changes in your life that necessitate pausing or reducing your monthly payments.

Perhaps you lose your job or decide to change careers, and you temporarily cannot pay the original amount set on these payments. Maybe you decide to become a stay-at-home parent for your children. Perhaps you are in the Peace Corps for two years or enter military service, and you cannot pay your student loans while you are in another country.

When you need to press pause on your student loan payments, you can apply for a student loan deferment with your loan servicer.

Student loan deferment is a process that allows you to stop paying most or all of the monthly payments on your student loans for a specific period. Deferment is similar to forbearance, although, with deferment, some federal student loans do not require you to make interest payments. Other federal loans and some private student loans will require that you make monthly interest payments, but deferment will still allow you to pay much less while you experience changes in your finances. 

Who Qualifies for Student Loan Deferment & Which Loans Can Be Deferred?

You must meet certain eligibility requirements for student loan deferment. Once you meet these, you can halt monthly payments on the principal of your student loan. For some loans, you can also temporarily stop making monthly interest payments too.

You might be eligible for student loan deferment if:

• You receive a Direct PLUS Loan or Federal Family Education Loan (FFEL) while you are enrolled at least half-time in a college, university, or professional school. This is also valid for six months after you graduate.
• You are the parent of a current student enrolled at least half-time, and you took out a loan for their education. 
• You are enrolled in an approved graduate fellowship program.
• You are receiving cancer treatment. You are also eligible for six months after the completion of your cancer treatment.
• You are in a rehabilitation training program to help disabled individuals.
• You are unemployed and seeking full-time employment.
• You experience economic hardship or are severely under-employed for up to three years.
• You are in the Peace Corps, for up to three years.
• You are in active-duty military service during a war, military operation, or national emergency.
• You were in active-duty military service. You can defer your loan for the past 13 month period following the conclusion of service or until you return to college at least half-time, whichever is first.

You can ask for student loan deferment for a few months to three years, depending on why you need to defer. You can then begin loan repayment when you have completed a graduate program, military service, or otherwise stabilized your finances.

It is also important to understand which loans require monthly interest payments during deferment and which allow you to stop making loan payments completely. This can help you save even more money in the short term, although it will increase the amount you pay in the long run.

Loans that generally do not require interest payments during student loan deferment include: 

• Direct Subsidized Loans.
• Subsidized Federal Stafford Loans.
• Federal Perkins Loans.
• Any subsidized portion of a Direct Consolidation Loan.
• Any subsidized portion of an FFEL Consolidation Loan.

Loans that require monthly interest payments during student loan deferment include:

• Direct Unsubsidized Loans
• Unsubsidized Federal Stafford Loans.
• Direct PLUS Loans.
• FFEL Plus Loans.
• Any unsubsidized portion of a Direct Consolidation Loan.
• Any unsubsidized portion of an FFEL Consolidation Loan.

Common Reasons for Student Loan Deferment

Loan servicers understand that there are several reasons you may need to pause payment on your student loans. Here are the most common reasons people ask to defer their loans:

• Economic hardship: The term economic hardship covers a range of financial problems, from being unemployed to having a low-paying position or sporadic work.
  
  Economic hardship can strike anyone, and loan servicers want you to be financially stable while making loan payments. Apply for an economic hardship deferment to pause your required payments for up to three years while you stabilize your finances.
  
• Cancer treatment: While you are going through chemotherapy, radiation treatment, surgery, or other medical procedures, you might not be able to work.
  
  Your oncologist and other members of your medical team will need to provide documentation to your loan servicer that you are unable to pay your student loans and report how long they expect the treatment to last.
  
• Graduate or professional school: Many lenders, including private student loan servicers, allow you to apply for a student loan deferment when you return to school or enter a graduate program. 
  
  Some lenders also allow you to apply for deferment while you are participating in a professional program that is not school. Types of professional training that qualify for student loan deferment include:
  • Internships, paid or unpaid.
  • Clerkships at law firms.
  • Fellowships.
  • Residencies.

There are benefits of getting student loan deferment while you are in graduate or another postsecondary school.

• Your payments are smaller each month because you only pay interest.
• You can defer with many lenders for two years, including private lenders.

The downside, however, is that any interest you are not required to pay while your loan is deferred will continue to accrue and be added to the principal. This means that you will pay more on your loan overall.

• Military deferment: Although the military pays servicemembers, you are not expected to focus on paying your student loans while you are serving. You also have up to 13 months after you return from active duty to manage your finances before your regular student loan payments begin.

Student Loan Deferment Starts by Working With Your Loan Servicer

Deferment is not an automatic process. While the federal government keeps track of your income through the Internal Revenue Service (IRS) and your postsecondary education through the Department of Education (DOE), they will not automatically defer or even adjust your monthly student loan payments.

There are different forms for each reason you might ask for a deferment. Check your lender’s website, or ask your lender for the correct form. This will help you provide accurate information so the loan servicer can make an appropriate determination.

If you have questions about student loan deferment, your loan servicer or the student financial aid office at your former college or university can help you. To begin the process, you will need to fill out a form with information about what type of deferment you need. Many deferment forms are available online, but you can still fill out a paper version and send it in. You must also provide information to prove you meet the qualifications for the type of deferment you requested.

Since many people going through financial struggles defer their student loans for a few months or years, you may worry about how this will look on your credit score. If you default on your student loans, which occurs when you simply stop paying them for almost a year, your credit score will suffer.

Working with your loan servicer to pause your loan payments, however, will not hurt your credit score at all. Your credit score will note that you had student loan deferment in place for a certain period, but this will not affect the actual number.