Decoding Student Loan Deferment

Student Loan Deferment Options: A Guide to Temporarily Pausing Your Payments

Student loan deferment options can vary based on the type of loan you have and when you received it. Federal student loans come with their own set of deferment rules, and private loans may offer different options altogether. The good news is that if you’re struggling to make payments, there are options that may help you avoid defaulting. Below, we’ll explore the different types of deferment and how they apply to your situation (as long as you’re not in default on your loans).

Types of Student Loan Deferment Options

Here’s a breakdown of the most common deferment options you may be eligible for:

• You’re enrolled at least half-time in school
• You’re unemployed and seeking employment
• You’re facing economic hardship
• You’re called to active military duty (military deferment)
• You’re serving in some volunteer programs or as a full-time law enforcement officer (for Perkins loans only)

Unemployment Loan Deferment

In today’s economy, finding work can be tough, especially for recent college grads. If you’re unemployed and struggling to make ends meet, you might qualify for Unemployment Loan Deferment. To qualify, you must provide proof that you are eligible for unemployment benefits and/or demonstrate that you are actively searching for full-time employment.

If you meet the eligibility criteria, you could have your student loan payments paused. However, it’s important to remember that just being unemployed won’t automatically qualify you – you’ll need to show that you’re genuinely seeking work and making an effort to find full-time employment.

Pro Tip: Make sure to keep a record of your job search efforts, such as applying for jobs, attending interviews, and reaching out to recruiters. This documentation will help when applying for unemployment deferment.

Economic Hardship Loan Deferment

If you’re going through a tough time financially, the Economic Hardship Loan Deferment might be an option for you. This deferment is granted on an annual basis and can last for a maximum of three years. To qualify, you typically need to meet one of the following conditions:

• You previously qualified for economic hardship deferment under another federal loan program.
• You are receiving federal or state public assistance benefits.
• You are serving as a Peace Corps volunteer.

If you’re approved, your payments will be paused, giving you some breathing room. However, like unemployment deferment, interest may still accrue, and in some cases, it may be added to your loan balance once the deferment ends (called capitalization).

Pro Tip: Economic hardship deferment is designed to offer relief, but it’s only a temporary fix. Before opting for deferment, explore whether other repayment plans, like Income-Based Repayment (IBR), might better suit your long-term financial goals.

Military Service Loan Deferment

If you’re a member of the military, you may qualify for Military Service Loan Deferment. This option applies to active duty service members and can even extend to National Guard members and military reserves who are called to active duty during a war, national emergency, or military operation. Unlike other types of deferment, military service deferment has no time limit, meaning you can defer your loans as long as you’re on active duty.

Military deferment is available under all three federal loan programs: FFEL, Direct, and Perkins. It offers a great deal of flexibility, so if you’re serving in the military or know that you’ll be deployed, don’t hesitate to contact your loan servicer for more information.

Pro Tip: If you’re on active duty and qualifying for military deferment, make sure to check if you’re eligible for other military-related benefits, like interest rate reductions or loan forgiveness programs.

Volunteer Service or Full-Time Law Enforcement Service (Perkins Loans Only)

For those with Perkins Loans, you may be eligible for deferment if you’re engaged in certain types of volunteer service or working in full-time law enforcement. This deferment applies specifically to Perkins loans, and the rules for eligibility can vary depending on the nature of the volunteer program or your law enforcement role.

Contact your loan servicer to learn more about this option and determine whether your volunteer program qualifies. Perkins loans often come with specific deferment options, so make sure you’re aware of the details before assuming you qualify.

Pro Tip: Before signing up for a volunteer program or law enforcement service in hopes of deferring your loans, double-check the program’s eligibility with your loan servicer. Some programs might not qualify, and you don’t want to miss out on other options!

Important Considerations When Opting for Deferment

Before you apply for deferment, there are some key things you need to consider. First, check whether interest will be capitalized during the deferment period. This means that any unpaid interest could be added to your principal balance, increasing the amount you owe in the long run. While deferment can provide immediate relief, it could potentially lead to more debt if interest accrues.

Also, keep in mind that deferment is not a permanent solution to student loan repayment problems. It’s designed to give you time to stabilize your finances or adjust your career situation. Make sure you’re also exploring other options, like income-driven repayment plans, that could offer more sustainable solutions for the long term.

Pro Tip: If you can afford to pay even a small amount during your deferment period, consider making partial payments to reduce the amount of interest that accrues. Every little bit helps!

How to Apply for Deferment

To apply for deferment, you’ll need to contact your student loan servicer directly. The process usually involves submitting documentation to prove that you meet the eligibility criteria for the deferment option you’re applying for. This might include proof of unemployment, evidence of economic hardship, or military orders. Your loan servicer will guide you through the steps and let you know exactly what you need to submit.

It’s crucial to stay on top of your deferment request, as it can take time to process. Make sure to follow up if you don’t hear back and keep copies of all correspondence related to your application.

Conclusion: Understand Your Options and Make Informed Decisions

Deferment can be a helpful tool in managing your student loans, but it’s important to fully understand the terms and conditions before you opt for it. Whether you’re unemployed, experiencing financial hardship, serving in the military, or involved in volunteer service, there are various deferment options available to you. Just make sure to weigh the pros and cons, and always contact your loan servicer to confirm the specifics of your deferment eligibility.

Deferment can offer a temporary break, but it’s important to use this time wisely by exploring other repayment options that may better suit your financial situation in the long run. Stay proactive and reach out to your loan servicer for advice — your future self will thank you!