Deferments
|
On This Page: |
Deferments allow you to postpone paying back your loans in certain circumstances. This is an extremely important strategy, particularly since interest does not accrue for subsidized loans during deferment periods. Interest does accrue on unsubsidized loans, but lenders may postpone charging interest and add it all to the loan principal after the deferment period is over. This is called capitalization. This calculator will give you an estimate of the amount of interest that will accrue on your loans during a specific deferment period and how much the new loan balance will be at the end of the deferment. If you can afford it, you should consider paying the interest while you are in a deferment period.
You are eligible for a deferment only if you have not yet defaulted on your loans.
Deferment options vary depending on the type of loan and date the loan was incurred. You can get the following deferments for most loans:
- In-school deferments for at least half-time study;
- Graduate fellowship deferments;
- Rehabilitation training program deferment;
- Unemployment deferment not to exceed three years;
- Economic hardship deferment, granted one year at a time for a maximum of three years; and
- Military deferment for loans disbursed on or after July 1, 2001.
There are a number of other deferments available in the Perkins program only, including:
- Full-time service for law enforcement and correction officers, and
- Volunteer service such as the Peace Corps.
The Direct Loan deferment forms are available on the Department of Education web site. You should contact your guaranty agency or school if you have a different type of loan. You should continue paying while your application is pending.
The economic hardship deferment is an often overlooked, but potentially very useful tool. It is granted one year at a time for a maximum of three years.
The first three qualification categories are “automatic” as long as you can provide supporting documentation. These three categories are:
- Previous qualification for economic hardship deferment under another federal loan program.
- Receipt of federal or state public assistance benefits. This includes payments under a federal or state public assistance program such as TANF, SSI, Food Stamps, or state general public assistance.
- You qualify if you are serving as a Peace Corps volunteer.
Other eligibility requirements relate to income. You can calculate your eligibility for economic harship at Finaid.org’s Economic Hardship Calculator.
| Example:
Joanna is not working but is not eligible for unemployment benefits and is not seeking new employment. She lives with her daughter. The first test to determine eligibility for an economic hardship deferment is whether her monthly income is less than two times the minimum wage or two times the poverty level for her family size (whichever is higher). Joanna receives a monthly SSDI payment of $800. Her annual income of $9600 is less than the two times the 2007 annual poverty level for a family of two of $13,690. The next step is to subtract her debt burden (her monthly loan payment amount assuming that she is on a ten year repayment plan) from her monthly income. Joanna has a ten year repayment plan requiring payments of $150/month. This leaves her with $650/month. This is less than the monthly minimum wage and less than the poverty level for her family size. Therefore, she is eligible for an economic hardship deferment. |
There are two ways to qualify for an unemployment deferment. The simpler way is to provide proof of eligibility to receive unemployment benefits. The other way is to show that you are conscientiously searching for full-time employment (defined as employment of at least thirty hours per week and expected to last at least three months). This second category requires you to certify that you are diligently seeking but unable to find full-time employment and in most cases that you are registered with a public or private employment agency.
You may qualify for this deferment whether or not you have been previously employed.
The initial deferment period can be granted for a period of unemployment that begins up to six months before the loan holder receives your request and can be granted for up to six months after that date. To continue the deferment beyond the initial period, you must also certify that you have made at least six diligent attempts during the preceding six month period to secure full-time employment.
This deferment cannot be granted for more than three years.
This deferment is available in all three loan programs, FFEL, Direct and Perkins. The FFEL and Direct program applies only to loans for which the first disbursement is made on or after July 1, 2001. There may be other options for military members with older loans, especially those with Perkins loans.
For more information regarding military benefits, see this fact sheet, or the Special Programs for Military page on this site.