How Student Loan Deferments and Forbearance Work

Qualifications for Deferments and Forbearance

Are you eligible for a postponement of your loan repayment? Many factors are involved, so let's break this information down into small chunks. First, we're going to investigate deferments for federal loans, since regulations are consistent for all borrowers. Remember, parents -- not students -- take out PLUS Loans for undergraduates. Therefore, it's the parents' ability to repay that is considered [source:]. In order to receive a deferment for any federal loan, you must prove your status in one of five areas:

  • Student status: You are enrolled at least halftime.
  • Continuing education: You are in a graduate fellowship or rehabilitation training program.
  • Unemployed: You are actively hunting for full-time employment, even if it's outside your field.
  • Economic hardship: You are in a difficult financial situation, such as serving in the Peace Corps, receiving public assistance or being a medical intern or resident. Many Web sites have calculators to help determine eligibility [source: FinAid: Hardship].
  • Active Military Service: You are in service during wartime, a military operation or a national emergency.

[source: Federal Student Aid: Repaying]

Loans obtained before July 1, 1993 have additional deferment qualifications [source: Federal Student Aid: Deferment].

Next, let's delve into forbearance. Federal loan forbearance may be available if your lender determines you are not eligible for a deferment. This option may be less favorable, because regardless of your type of loan, you will be responsible for accrued interest [source: Federal Student Aid: Postponing]. Nevertheless, if you're finding it difficult to make payments, you may fit into one of the following eligibility categories:

  • You suffer a temporary hardship, such as unemployment.
  • Loan payments are more than 20 percent of your gross income.
  • You are in an intern or residency program.
  • You are a member of AmeriCorps, engaged in public service.
  • You are participating in the Teacher Loan Forgiveness Program.

[source: Federal Student Aid: Forbearance]

There is some overlap between the categories for deferment and forbearance, so which you receive depends a great deal on your lender's view of your repayment abilities, the severity of your problem and your personal responsibilities (such as number of dependents).

If you have a private (alternative) loan, you might be able to get a deferment or forbearance similar to those offered for federal loans. Alternatives and requirements differ among lenders; check with yours to determine your chances.

By now you might have an idea of whether you want to request a deferment or forbearance. Let's take a look at the application process next, starting with federal and private deferments.