THE BLOG

When Is a Student Loan Deferment Necessary?

06/05/2015 05:10 pm ET | Updated Jun 05, 2016

As an independent, transparent marketplace for student loans, Credible helps borrowers understand all of their student loan repayment options.

Student loan deferment, putting a pause on payments without facing penalties, is available to borrowers under special circumstances. Depending on the loan, interest might accrue or be put on hold during deferment. In certain times, deferment is necessary to stay afloat financially.

For School and Training

Returning to school at least part-time or studying for a graduate degree will qualify you for a student loan deferment. Some scholarship and fellowship opportunities are also eligible to be deferred as well as for internships or residency. You will not need to request a student loan deferment if you are within your grace period between your undergraduate and graduate studies. If the grace period has passed, you will have to request your student loan deferment from your loan servicer. These terms can differ between private and federal lenders so, if you are thinking about going back to school, learn what options and terms your servicer provides and plan accordingly.

During Unemployment

Unemployment is hard to deal with emotionally and financially, which thankfully some student loan lenders understand and you should reach out to your lenders to discuss your situation to determine what their policies. For federal loans, you may get up to three years to defer student loans. Remember, though, that during periods of deferment you will still have to pay accruing interest unless your loans are federal subsidized.

During Times of Economic Hardship

Even if you are experiencing economic hardship, always try and avoid defaulting on your student loans. Instead, talk with the loan advisor for more information on how you can defer student loans. Economic hardship is granted one year at a time for up to three years in total. You will qualify for hardship if you meet one of the following requirements:

  • Your full-time income does not exceed whichever is larger: the federal minimum wage rate or 150 percent of the poverty line income for your state and family size.
  • Can provide receipts that you receive federal or state public assistance benefits, such as food stamps or SSI.
  • You are serving as a Peace Corp volunteer.

While in the Military

All federal loan types will offer deferment during active duty during a war or other military operation or national emergency for military service members. There is no time limit for military deferment, but the eligibility period does end 180 days after being dismissed from active duty. There are also special deferments for active military members who are also enrolled in schooling.

Getting a student loan deferment can help you out financially. Just be sure to continue your payments until your lender approves of your deferment. Do not stop paying on your loans because you believe that you cannot afford them; this will only cause more issues with your loans and even make you ineligible for deferment.

If your interest rates are high and contributing to your high monthly payments consider refinancing with a strong cosigner to help alleviate your debt burden –  visit Credible to explore your options.

Biggest Money Mistakes 20-Somethings Make