What is student loan deferment?

Student loan deferment allows eligible student loan borrowers to temporarily stop or lower their monthly payments. The office of Federal Student Aid says it’s meant to offer relief to borrowers in a “short-term financial bind.”

Read on to get a closer look at how student loan deferment works and what borrowers should know about the process.

Key takeaways

• Student loan deferment allows borrowers to temporarily stop or reduce their monthly payments.
• Enrollment in school, economic hardship or unemployment, cancer treatment, military service and rehabilitation are circumstances that might make someone eligible for federal student loan deferment.
• There are other ways to handle repayment concerns, like an income-driven repayment plan or student loan consolidation.

To receive federal student loan deferment, borrowers can typically notify their loan servicer and submit a form found on the Federal Student Aid website. Additional documentation might be needed, depending on the type of deferment. Students who are enrolled in school at least part time may be automatically approved for student loan deferment.

Does interest accrue during deferment?

During the deferment period, borrowers might still be liable for accruing interest. As the interest continues to grow, the total amount a borrower pays will increase.

Whether loans accrue interest during the deferment period often depends on the type of loan. Federal loans that continue accruing interest during deferment include:

• Direct unsubsidized loans
• Unsubsidized federal Stafford loans
• Direct PLUS loans
• The unsubsidized portion of direct consolidation loans
• The unsubsidized portion of federal family education consolidation loans

Does student loan deferment apply to private loans?

Student loan deferment for private loans is dependent on the lender, and qualifications can vary. Some lenders may charge additional fees for this service.

Although private lenders are not required to offer deferment options, many do. Private loan borrowers could contact their lender early in the repayment process to learn about deferment options.

According to Federal Student Aid, a borrower can qualify for student loan deferment in certain circumstances:

Enrollment in school

Federal student loan borrowers typically receive automatic deferment while enrolled in an eligible undergraduate, graduate or professional school. They must be enrolled at least half time to qualify. 

Deferment often applies until the student is no longer enrolled in a program. If the student holds a Direct PLUS loan, they may qualify for an additional six months of deferment after graduation.

Economic hardship or unemployment

For individuals currently facing economic hardship or unemployment, loan deferment may be an option. An economic hardship deferment is offered for up to three years.

Qualifications may include:

• Receiving state unemployment benefits
• Receiving temporary assistance like welfare
• Working full time with an income below 150% of the poverty guidelines for the state
• Serving in the Peace Corps

Cancer treatment

Borrowers undergoing cancer treatments may qualify for loan deferment during treatment and for six months after.

Military service

Active-duty military service members may be eligible for deferment during war, military operations or a national emergency. This deferment could be followed by a 13-month grace period or end if the borrower reenrolls in an eligible school at least part time.

Rehabilitation program

A borrower may qualify for deferment while enrolled in a rehabilitation treatment program. Qualifying programs might focus on alcohol and substance abuse or mental health treatment.

While deferment might be a helpful option for borrowers in certain situations, there are costs and alternatives to consider. If you’re thinking about deferring your loans, here are a few questions to ask:

• What type of loan do I have? If you have a loan that will likely not accrue interest during deferment, such as a federally subsidized or Perkins loan, deferment may be right for you. But if you have an unsubsidized, private or other type of loan that continues accruing interest, it’s worth considering that cost.
• Will my current situation end soon? If your current situation is temporary, deferment could help you get through it. But a more sustainable plan may be needed for ongoing circumstances.
• Can I afford a reduced monthly payment instead? While deferment can help in the short run, it’s usually not intended to be a long-term solution. It might be possible to make lower monthly payments instead.

Before applying for deferment, consider talking to the loan servicer. They may be able to find a way for you to continue making payments that fit your budget.

Here are a few other options for managing payments:

Income-driven repayment plan

Federal income-driven repayment plans offer reduced payments that can be more affordable depending on the borrower’s income and family size. It could be a helpful solution for borrowers with long-term circumstances.

For some borrowers, this could mean paying as low as $0 per month. And if the loan is not fully paid off within 20 to 25 years, it may be eligible for forgiveness. Federal Student Aid explains the four types of income-driven repayment plans and their qualifications.

Student loan consolidation

For borrowers juggling multiple federal student loans, a direct consolidation loan can help lower monthly payments, secure a fixed interest rate and access forgiveness options. It’s free to apply.

However, only federal loans—not private—can be consolidated with a direct consolidation loan. And the length of time and amount of interest paid may increase.

Private loan borrowers could check with their current lender for consolidation and refinancing options—or shop around with other lenders.

Forbearance

Forbearance is an alternative that can help those who may not qualify for deferment. Forbearance usually places a borrower’s loan payments on pause for up to 12 months.

While forbearance works similarly to deferment, there’s a distinction—interest accrues during forbearance no matter the loan type. The accrued interest is added to the total loan amount at the end of the forbearance period.

Typically, student loans that are currently under a deferment or forbearance won’t count toward forgiveness. Once a borrower resumes making payments, forgiveness like public service loan forgiveness or income-driven repayment forgiveness might be an option.

When unexpected situations arise, it can be difficult to continue making student loan payments. For some borrowers, student loan deferment could help by temporarily pausing or reducing monthly payments.

But deferment may not be right for everyone. If you’re having trouble making student loan payments in the long run, an income-driven repayment plan or loan consolidation may be better suited to your needs.