Postponing Your Federal Student Loan Payments
During repayment there may be a time when you might have trouble making your monthly payment on your student loan. One of the benefits of federal student loans is that they have built-in flexibility that makes paying them back easier. One of the flexible repayment options is the ability to postpone your payments temporarily.
This can be especially helpful if you lost your job, had unexpected medical expenses, or some other financial crisis. Whatever the case may be, a deferment or forbearance can help you postpone your payments. Both options can give you just the time you need to get back on your feet and bring your loan current if you've missed any payments. But, these options won't erase any past due payments that were previously reported to credit bureaus. If you know you're going to need help, it's best to seek out a deferment or forbearance before you miss any payments.
Deferments are available for a variety of situations, including when you're:
- Back in school at least half-time.
- Unemployed, or working less than 30 hours a week and looking for full-time work.
- Temporarily having difficulty making ends meet.
- Actively serving in the U.S. military during a war, military operation, or national emergency.
- Actively serving in the Peace Corps.
- In a graduate fellowship program or rehabilitation training.
To qualify for a deferment, you must meet certain requirements; however, once you meet the requirements, you can't be turned down.
A forbearance may be a good option if you're not eligible to postpone your payments using a deferment. But, a forbearance isn't automatically granted, rather it's typically approved at your lender's or servicer's discretion. If you receive one, understand that the time limit may be set by your lender or servicer, or by the regulations. A good practice is to use as little forbearance as possible, in case you need to request additional forbearance in the future.
During a deferment you aren't required to make payments, but you're responsible for any interest that accrues on all loan types except subsidized Stafford and subsidized consolidation loans. When your deferment ends, any unpaid interest is added to the amount you borrowed—this is called capitalization. Your increased loan amount then generates more interest, adding to the overall cost of your loan. You can limit the amount to be capitalized by making interest payments during deferment.
During the forbearance period, you're responsible for any interest that accrues, regardless of the loan type. When your forbearance ends, unpaid, accrued interest may be added to the amount you borrowed—this is called capitalization. Your increased loan amount then generates more interest, adding to the overall cost of your loan. You can limit the amount to be capitalized by making interest payments during forbearance.
Remember, deferment and forbearance are temporary. Afterwards, you'll need to begin making payments again. It's important you select a new repayment plan before your deferment or forbearance ends, so you can make on-time payments.
Your deferment or forbearance may give you just the breathing room you need to make new student loan payment arrangements.
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Not finding the right repayment option?
Not everyone follows the same path while in school, or afterward when you're expected to pay back your loans.
Learn more about other repayment options to find one that best fits your circumstances.
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