Laws Regarding Student Loan Deferment

Borrowers who cannot afford to repay their student loans right away can apply for deferment to waive or lower the payments for a specific amount of time. The rules for student loan deferment apply to all types of federal student loans, but they do not necessarily apply to private student loans. Borrowers should check with their private lenders to find out about specific policies they have in place regarding deferment.

In School

All students who are enrolled at least half-time pursuing a degree or certificate can defer student loan payments. Some internship and residency programs also qualify the borrower for in-school deferment. The deferment suspends all payments until the student drops below half-time enrollment. Some types of loans give the student a six-month grace period between ending school and beginning repayment. In-school deferment makes it possible for students to pursue further education without worrying about paying for the previous stage of education yet.

Public Service

Many public service jobs qualify individuals to defer student loan payments. Active duty military personnel can have their loan payments deferred while they are active and for 180 days following deactivation. Military personnel who are called to active duty from a student status qualify for up to 13 months of deferment following deactivation. Some volunteer positions, such as those with the Peace Corps or Americorps, come with automatic student loan deferment and a stipend following completion of service. Some teaching and public health positions also qualify the borrower for deferment.

Economic Hardship

Borrowers who are unemployed or are otherwise suffering extreme economic hardship will usually qualify for student loan deferment. To qualify for economic hardship deferment, you must either be receiving welfare assistance or make less than 150 percent of the monthly poverty guidelines for your family size and state of residence. To qualify for unemployment deferment, you must be actively looking for work and be registered with an employment agency in your area. Periods of unemployment or economic hardship deferment cannot exceed three years.

Considerations

Students whose loans were not subsidized by the federal government will continue to accrue interest on their balances while the loan payments are deferred. If the borrower does not pay the interest before beginning repayment again, it is capitalized, meaning it is added to the balance on which future interest is calculated. This can increase the cost of repaying the loan. Therefore, borrowers who qualify for deferment but can still afford to make payments should either not defer the loans at all or should make payments during deferment to cut the future cost of repaying the debt.