How to Use Student Loan Deferment and Forbearance
Deferment and forbearance are ways of postponing your monthly student loan payments. Federal student loans qualify for both deferment and forbearance, but you must not be in default on your loan(s) (that’s when you stop making payments for 270 days or more). Only some private loans allow for either option. Before you rush off to see if you qualify, know that these shouldn’t be your first choices when money is tight.
Just because you’re struggling to pay your bills doesn’t mean you can afford deferment or forbearance, because it can leave you in a worse financial position in the end. Interest can continue to accrue, growing the amount owed, and it’s only putting off the payments, not eliminating them.
Here’s what you should do first before contacting your loan servicer for deferment or forbearance:
- Try and lower your payments through a different repayment plan.
- Review your budget and cut all unnecessary spending to put every dollar you can toward your loan payments. Consider getting a roommate, moving in with your parents, or selling your car.
- Get another job for extra income.
This will require hard work and self-discipline, but paying your loans on time, without incurring any fees or extra interest, will make for a bright future.
There are limits to how long you can use deferment and forbearance. When you use it up, it’s no longer an option, even if you fall on harder times later. If you need to use this time, use it wisely.
If these are the last loan payment options left to you, here’s what you need to know.
Deferment:
Used to postpone payments on a subsidized loan without requiring you to pay the accruing interest, so the principle of the loan won’t grow while your payments are on hold. For unsubsidized loans, the interest will still accrue, and you are responsible for paying it. With subsidized Stafford loans, the federal government will pay any interest that accrues during the deferment period. Deferments are granted in six-month increments.
For eligibility requirements, speak with your loan servicer.
Forbearance:
An option for those who don’t qualify for deferment. With all loans in forbearance, you are still responsible for paying the interest total each month. Mandatory forbearance must be granted if you can prove that payments on your federal student loans each month are greater than 20 percent of your monthly gross income. You can postpone federal student loan payments through forbearance for up to 12 months and private loans in three-month increments up to 24 months.
For eligibility requirements, speak with your loan servicer.