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 federal 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 for federal loans 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.
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 deferment options above are for federal government loans. Many private lenders also offer deferments. These vary by program. Read your loan agreement carefully or ask your lender about options that may be available for your private loan.
Economic Hardship Deferment
The economic hardship deferment 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.
You can also qualify based on your income if:
- You are working full-time and your monthly income does not exceed the larger of A) The federal minimum wage rate or B) 150% of the poverty line income for your family size and state. (In 2012, the poverty line for a family of two living in the 48 contiguous states is $15,130).
Prior to July 1, 2009, there were two other income-based eligibility categories. These two categories are only relevant for applications submitted before July 1, 2009:
- If you are NOT working full-time and your monthly income does not exceed the larger of A) two times the federal minimum wage or B) two times 150% of the poverty line for your family size and state. Under this category, you also must show that after subtracting the total amount of monthly payments on federal education loans from your monthly income, the amount remaining is not larger than A) the federal minimum wage rate or B) 150% of the poverty line for your family size and state, or,
- If you are working full-time and the total amount of monthly payments on your federal student loans are equal to or larger than 20% of your monthly income. Under this category, you also must show that after subtracting the total amount of monthly federal student loan payments from your income, the amount remaining is less than 220% of the larger of A) the federal minimum wage rate or B) 150% of the poverty line for your family size and state.
You can calculate your eligibility for economic hardship at Finaid.org’s Economic Hardship Calculator. Borrowers should use this form (FFEL) when applying for an economic hardship deferment. The Department of Education released a new Direct Loan economic hardship deferment form in July 2012.
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 diligently 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 under thie second category whether or not you have been previously employed.
If you apply under the seeking full-time employment category, the initial deferment can be granted for a period 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. If you get the deferment based on your search for full-time employment and you want to extend it beyond the initial period, you must certify that you have made at least six diligent attempts during the preceding six month period to secure full-time employment.
Each unemployment deferment may last for up to six months. You must reapply to extend the deferment. If you are applying under the seeking full-time employment category, you must certify that you have made at least six diligent attempts to obtain full-time employment in the last six months. This deferment cannot be granted for a total of more than three years.
Military Service Deferment
This deferment is available in all three loan programs, FFEL, Direct and Perkins. It is available to military service members on active duty during a war, other military operation or national emergency, members of the National Guard called to active duty during a war, military operation or national emergency and reserve or retired members of the Armed Forces called to active duty during a war, military operation or national emergency.
This deferment may be granted based on a request from the borrower or the borrower’s representative.
There is no time limit on the military deferment. (The previous three year time limit was eliminated in 2007). The eligibility period ends 180 days after the borrower is demobilized from active duty service. There is a form that borrowers (or their representatives) should use when applying for this deferment.
Some borrowers called to active duty will not be eligible for military deferments. To help cover this gap, there is a mandatory forbearance available to National Guard members who qualify for the post-active duty deferment (see below), but do not qualify for a military or other deferment.
Active Duty Student Deferment
This deferment should really be called “Post-Active Duty Deferment” because it is for borrowers who are enrolled in school when they are called to active duty and plan to re-enroll after they have completed their service.
This deferment is available in all three loan programs, FFEL, Direct and Perkins. Eligible borrowers include members of the National Guard and reserve or retired members of the Armed Forces called to active duty at the time, or within six months prior to the time, that they were enrolled in school. These borrowers may receive deferments for up to 13 months following completion of active duty military service and any applicable grace period. The period expires at the earlier of a borrower’s re-enrollment in school or the end of the 13 month period.
Similar to the military service deferment the borrower must be on active duty to qualify for this deferment. Unlike the military service deferment, activation during a war or other military operation or national emergency is not required.
See the special programs for military page of this site for information about other options for military service members and certain civilians affected by war or national emergencies.