What is Student Loan Deferment and How It Can Help You

Student loan deferment lets you temporarily suspend making payments on your student loans. Many loans automatically come with a 6 month deferment period upon graduation (usually to allow an individual time to find employment). This applies to most federal student loans, including Stafford Loans, PLUS Loans, Graduate PLUS Loans, and Federal Consolidation Loans. If you have a subsidized loan, interest does not accrue during deferment. It does accrue, however, if you have an unsubsidized loan.

If you are thinking about deferment, there are many programs available to you for which you may qualify. Some of the programs also overlap with Student Loan Forgiveness. An example of this is the Peace Corps. Not only do you qualify for deferment, but you can also have portions of your loan forgiven all together.

Loan deferment is designed to be temporary, so make sure that you are still making arrangements to pay back your loan. If it is a federal loan, it cannot be eliminated through bankruptcy. Here is the full list of reasons for student loan deferment.

Eligible Reasons for Student Loan Deferment

Action Programs Deferment

• Time Limit of 36 Months
• Must be a full-time paid volunteer in Action Programs
• You must agree to serve for at least one full year

Armed Forces Deferment

• Time Limit of 36 Months
• You must be on active duty in the armed forces of the United States (Army, Navy, Air Force, Marine Corps, or Coast Guard)
• You must submit an armed forces deferment form that has been certified by your Commanding or Personnel Officer
• If you are in the reserves, you may qualify if: You are serving full-time for at least a year or are serving under an order of national mobilization.

Economic Hardship Deferment

• Time Limit of 36 Months, but must reapply every 12 months
• You are receiving payment under a federal or state public assistance program, such as Temporary Assistance for Needy Families (TANF), Supplemental Social Security Income (SSI), Food Stamps, or state general public assistance
• You are working full-time and your total gross monthly income is less than or equal to the larger of the monthly federal minimum wage rate or 150% of the poverty guideline for your state. You can find out the poverty guideline here: Federal Minimum Wage and Poverty Guideline.

Graduate Fellowship Program Deferment

• No Time Limit
• You must enroll in a fellowship program that: provides sufficient financial support to allow for full-time study for at least 6 months, requires a statement of objectives, requires periodic reports or projects that measure the graduate fellow’s progress
• You must have a Bachelor’s degree conferred by an institution of higher education
• Been accepted into the fellowship program

In-School at Least Half-Time Deferment

• No Time Limit
• You must be enrolled in an eligible school at least half-time

Internship/Residency Deferment

• Your internship/residency must be a supervised training program
• Your internship/residency must lead to a degree or certificate
• You must at least hold a Bachelor’s Degree before acceptance into the program
• You must have a deferment form signed by an authorized official of the organization from which you are taking the program

Parental Leave Deferment

• Time Limit of 6 Months
• Federal PLUS Loans are not eligible
• You must be pregnant, caring for a newborn child, or caring for a newly adopted child
• You must NOT be working full-time or attending school during the deferment period
• You must have been enrolled in school at least half-time during the six months prior to this deferment

Peace Corps Deferment

• Time Limit of 36 Months
• You must agree to serve in the Peace Corps for at least one year
• You must have the deferment form signed by a Peace Corps official

Tax Exempt Organization Deferment

• Time Limit of 36 Months
• You must be serving full-time in an organization that has a tax exemption under Section 501(c)(3) of the Internal Revenue Code of 1986
• You must assist low income people and their communities in eliminating poverty and poverty-related human, social, and environmental conditions
• You must not earn more than the federal minimum wage; however, you may receive fringe benefits like others in the organization
• You must not engage in religious instruction, proselytizing, fund raising to support religious activities, or conduct worship services as part of your duties
• You must have agreed to serve in this organization for at least one year

Teacher Shortage Area Deferment

• Time Limit of 36 Months
• Federal PLUS Loans are NOT eligible
• You must teach full-time in a public or non-profit private elementary or secondary school in a geographic region, grade level, academic, instructional, subject matter, or discipline classified shortage area, as defined by the U.S. Department of Education.

Unemployment Deferment

• Maximum Time Limit of 36 Months
• Must Reapply Every 6 Months
• You must be diligently seeking but unable to find full-time employment in any field or at any salary or responsibility level even if you are not eligible for unemployment benefits (or if your eligibility expired)
• You must be registered with a public or private employment agency if there is one within 50 miles of your permanent or temporary address.
• If you are requesting an extension of your current unemployment deferment, and you are not providing documentation of your eligibility for unemployment benefits, you must certify that you have made at least 6 diligent attempts to find employment on the most recent 6 months

What else you should know

All deferment programs listed above are designed to be temporary. Also, with all federal student loans, it is important to remember that they cannot be discharged in bankruptcy. Also, while in deferment, if you have an unsubsidized loan, you will still accrue interest which must be paid.

Some of the programs above also may allow you to qualify for Student Loan Forgiveness. There are many ways to get student loan forgiveness, and it should be something that you consider, as it is free money. Please check out my article on Ways to Get Student Loan Forgiveness.

Finally, as with all items relating to your student loans, you should contact your student loan servicer immediately, and see what options you have available. There may be other programs available beyond what is listed here.