Student loan deferment: How does it work?

Student loan deferment allows you to temporarily pause payments on your student loans. However, you must meet specific eligibility requirements to qualify. If you do, you can stop making payments for a period of time, and interest may be subsidized on some of your loans during that period.

This guide will explain student loan deferment, how it differs from student loan forbearance, and when you may be eligible to take a payment break using this approach.

What is student loan deferment?

Student loan deferment allows you to temporarily postpone making payments on some types of student loans.

When your loans are in deferment, you will not owe interest on Direct Subsidized Loans, Subsidized Stafford Loans, or Perkins Loans issued by the federal government. You also won’t owe interest on the subsidized portion of Direct Consolidation Loans or FFEL Consolidation Loans. If you have other federal loans, interest will continue to accrue even while payments are paused. This interest will eventually capitalize and be added onto your loan balance when deferment ends.

Private student loan lenders may offer programs to pause payments as well. Some lenders call these programs deferment and others forbearance. Whether private loans are deferred or are in forbearance, interest will generally continue to accrue and will be added onto the balance of the loan.

Deferment vs. forbearance

Student loan deferment is different from forbearance, though you must meet specific requirements to qualify for either one. With forbearance, you can postpone payments for up to 12 months at a time. Unlike deferment, interest will accrue on all federal student loans that are in forbearance. But this interest won’t be capitalized at the end of the forbearance period.

Types of deferment

You must qualify in order to be eligible for deferment of federal student loans. Here are some of the situations when you can become eligible:

• Economic hardship: You can qualify for this deferment if you are receiving means-tested benefits, are serving in the Peace Corps, or work full-time but have monthly earnings below 150% of the poverty guidelines given your location and family status, or if your monthly income isn’t higher than the minimum wage rate (whichever is greater). Your loans can be deferred due to economic hardship for a maximum of three years.
• Unemployment: If you’re receiving unemployment benefits while looking for full-time work, you can defer your loan payments for up to three years on qualifying federal student loans.
• Medical treatment: If you're undergoing cancer treatment, you can defer payment of loans while being treated and for six months after your treatment ends.
• Graduate fellowship: If you're enrolled in a graduate fellowship program, you can defer loan payments while completing the program. Fellowships are programs that provide financial support to grad students completing research. Your fellowship program must be approved to receive the deferment.
• In school: If you are enrolled at least half-time in an eligible school, you can qualify to have loans deferred while you are completing your coursework and for an additional six months after dropping below half-time for graduate and professional students with Direct PLUS Loans. In most cases, this deferment is automatic.
• Military service: If you are on active-duty military service, you can have payments deferred if you qualify. You may also be eligible to have payments deferred for 13 months after you complete active-duty service.
• Rehabilitation training: You may qualify for deferment if you’re receiving treatment for drug abuse, mental health, or alcohol abuse through an approved rehabilitation program.
• Parents with Direct Plus Loans: Parents who took out a Direct PLUS Loan are eligible for deferment if their child is enrolled at least half-time at an eligible school. Parent PLUS loans can also be deferred for six months after the student graduates or drops below half-time.

Many private student loan lenders offer deferment or forbearance under similar circumstances, but the rules for when loans can be paused vary by lender. Contact your lender to find out your options.

Pros and cons of student loan deferment

There are many advantages of deferment, but there are also some downsides. Here are the biggest pros of deferring student loan payments:

Pros of deferment

• You can get financial relief during a difficult time: If you’re unemployed, going through cancer treatment, or otherwise qualify, you won't have to worry about making student loan payments.
• You can avoid defaulting on your loan: Late payments and defaulting on student loans can damage your credit and have other financial consequences. It’s usually better to put your loans into deferment than to default.
• You can focus on other opportunities: It might be difficult for you to pursue a graduate fellowship or to perform military service if you're worried about paying back your loans.

Cons of deferment

• Interest still accrues on some loans: Although you won’t see interest charged on certain loans while they’re deferred, that's not the case with all loans. If you have unsubsidized loans, PLUS loans, or private student loans, interest will accrue and will be added to your loan balance.
• Your loan balance can grow: If you have paused payments on most loans (other than subsidized loans), the unpaid interest will cause your loan balance to increase. Since you’ll owe more, it will be costlier to repay your loans.
• You can only defer loans for a limited time: Depending on the reason for deferment, you may be limited to three years or less of paused payments.
• Eligibility may depend on your lender: This is an especially big issue for private student loans, where there's not necessarily a standard set of circumstances that allow you to pause payments.

How to apply for deferment

Deferment is automatic in most cases while you’re in school at least half-time. But if you want to become eligible for other types of deferment, you'll have to request it. This is true of both federal and private student loans.

The Department of Education has forms online you can complete to request deferment. There are different forms depending on your reason for pausing payments. For example:

• Economic Hardship Deferment Request
• Unemployment Deferment Request
• Military Service and Post-Active Duty Student Deferment Request
• Cancer Treatment Deferment Request
• Graduate Fellowship Deferment Request
• Parent PLUS Borrower Deferment Request
• Rehabilitation Training Deferment Request

You’ll need to complete the form, provide any requested documentation to show eligibility, and submit this to your student loan servicer.

If you have a private loan, you'll need to contact your loan servicer directly to find out the process of submitting a deferment request.

Deferment alternatives

Deferment can help you get some breathing room if you can't afford your loans, but it's usually best as a short-term solution until you can resume payments. After all, the longer your loans are deferred, the more your loan balance can grow, and the longer it will take to become debt-free.

There are some alternatives to deferment you can consider, including the following:

• Forbearance: Forbearance can be easier to qualify for if you have federal student loans, and you may be able to keep payments paused for longer. Be aware, though, that interest keeps accruing on all loans in forbearance, including subsidized loans.
• Change your payment plan: If you have federal loans, you can choose an income-driven repayment plan that caps payments at a percentage of your income, which may be more affordable. After 20 or 25 years, you’ll have any remaining loan balance forgiven on an income-driven plan (with the timeline for forgiveness dependent on the plan).
• Employer tuition repayment programs: You may be able to find a public or private employer that provides tuition reimbursement. With your company's help, the loan payments may become more affordable.
• Refinance student loans: Refinancing can allow you to lower your interest rate and change your repayment timeline. This could potentially lower your monthly payments and total costs. It's best to only refinance private loans, though. Since you must refinance with a private lender, refinancing your federal loans will cause you to give up federal loan benefits.