What is Student Loan Forbearance and Deferment?

Staff Writer
September 20, 2017
What is Student Loan Forbearance and Deferment?

Understanding forbearance and deferment is critical for every student loan holder. The U.S. Department of Education does not want anybody to default on his or her student loan. To help you avoid default, the department has two programs designed to keep you out of trouble – deferment and forbearance.

Many people get these programs confused because they essentially do the same thing – pause your loan payments. But there are some critical differences that you must understand before you apply for one of these programs.

What is Student Loan Forbearance?

Forbearance is a temporary pause in Federal Family Education Loan (FFEL) and direct loan payments. This includes persons who cannot work because of health problems or disability, and those in economic distress.

The big advantage to forbearance is that it can go on as long as necessary. The big disadvantage is that interest keeps accumulating even though the repayment stops. That means you will have more to pay once forbearance ends.

How Forbearance Works

There are two types of forbearance: mandatory and discretionary. Lenders are required to offer mandatory forbearance to a number of people, including students whose loan repayments exceed 20% of their gross monthly incomes.

Others who are eligible include:

  • Some members of the National Guard,
  • Some teachers,
  • Medical and dental school residents,
  • Veterans or active duty military participating in the U.S. Department of Defense Repayment Program.

Discretionary forbearance is available on many loans, but at the end of the day it is up to the lender. Many lenders will offer forbearance because it reduces hassle and paperwork for them.

To receive forbearance you will have to contact your lender and ask them how to apply. When you do, you should ask about other alternatives such as Income Driven Repayment Plans.

What is Student Loan Deferment?

Deferment is a much better deal than forbearance because it postpones your interest payments as well as your regular repayments. This means you will not have more interest to pay when deferment ends.

Unfortunately, deferment is only available for certain federal loans:

  • Perkins Loans,
  • Direct Subsidized Loans,
  • Federal Stafford Loans.

Who is Eligible for Deferment?

Surprisingly, many people might be eligible for up to 36 months of deferment under current federal guidelines.

You might be eligible if you are:

  • Unemployed,
  • Only working part-time,
  • Attending college part-time,
  • In graduate school,
  • On active duty in the military,
  • In the national guard or reserve and subject to call up,
  • Working for the government,
  • Disabled,
  • A working mother.

Teachers who have applied for the Teacher Loan Forgiveness program might also be eligible.

How to Apply for Deferment

If you think you qualify, you will have to contact your lender and ask them how to apply.  You will have to be patient because it can take a while to get approved.

You should have your situation fully documented, because lenders will want proof that you are eligible for the program. Some borrowers have had to explain their situation several times before getting approved.

Some private lenders will also offer deferment; as with private forbearance you will have to contact the lender and ask if this is available. Many lenders have a number of different programs available, but it might take time to apply for them.

Alternatives to Forbearance and Deferment

Forbearance and deferment are not always the best solutions for student loan debt relief. A lot of people who take these options end up in more trouble because they cannot make the payments when the pause ends.

Many experts recommend that borrowers explore alternatives such as Income Based Repayment programs first. A lot of people are better off making smaller payments, changing jobs, or making lifestyle changes rather than applying for forbearance or deferment.

A big problem is that many people end up suddenly faced with payments they cannot cover. Others might have to spend more time paying off a loan because of the interest that built up over deferment.

Finally you should remember that deferment and forbearance are emergency measures. These programs are designed for people who have no choice.

Need More Advice?

Even though deferment or forbearance can be lifesavers, these programs are designed as temporary solutions, not permanent answers.

If you’re still unsure on how to proceed with either of these options, call the experts at Student Debt Relief on 844-669-4407. Student Debt Relief is a private organization with a great track record for helping students with deferment, forbearance, and other debt related issues.

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