Deferment vs. Forbearance
Although it may seem impossible to make your monthly student loan payment. Whether you decided to go back to grad school, your entry-level job salary isn’t what you predicted, or maybe a health condition is preventing you from working—but you have deferment and forbearance options to put a hold on your student loan payments and bring your account current without having to hurt your credit. Each option does have its own eligibility rules and time restraints. This article will give you a better insight on what fits your unique situation—there is almost always a solution for you.
Avoid Default With Deferment or Forbearance
If you’re going through financial hardship, back in school, are currently unemployed, or you’re on active duty military service, postponing payments with deferment is the best choice for you. As You may know, Subsidized Stafford loans and subsidized consolidation loans will not accrue any additional interest, so your balance after the deferment period will be the same as when you first started it. Furthermore, for unsubsidized Stafford loans, PLUS loans, SLS loans, or unsubsidized consolidation loans, interest will accrue during the deferment period, so it’s recommended to pay at least the accrued interest on your loan each month you’re on deferment. This will stop the loan interest from ballooning on your principal balance and requiring you to pay more in the long run.
If your in a internship, do certain types of community service, or if you’re going through financial hardship, you may also qualify for postponed payments with forbearance. All your loans do accrue interest during forbearance, so it’s wise of you to pay the interest during this period to avoid paying more on your loan.
The federal government has allowed for these deferment options. Read on to see if these situations apply to you. Remember—just because you are eligible for a deferment does not mean you are required to request it; if you feel you can make payments on your loan, you are encouraged to do so.
Armed Forces Deferment
If you are on active military duty in the Armed Forces or National Guard, you may be eligible for deferment and or other student loan benefits for members of the military.
In Order to qualify for this type of deferment, your 1st Stafford or SLS loan must have been disbursed before July 1, 1993, or for parent borrowers, your PLUS loan must have been disbursed before August 15, 1983. Consolidated loans do not qualify for this type of deferment. Or You must be serving on active duty in the U.S. Armed Forces during a war, military operation, or national emergency. It’s also possible to qualify if you’re serving in the reserved Armed Forces or the National Guard in a full-time capacity for a period of at least one year. The maximum deferment time limit for this is 36 months, inclusive of any Public Health Services and National Oceanic and Atmospheric Administration (NOAA) deferment time used.
Domestic Volunteer Deferment
If you are a full-time, paid volunteer for an ACTION (Domestic Volunteer Service Act of 1973, VISTA, or AmeriCorps) program for more than a year, you may also qualify to defer payments.
To qualify for this deferment, your first Stafford or SLS loan must have been disbursed before July 1, 1993, or for parent borrowers, your PLUS loan must have been disbursed before August 15, 1983. Consolidation loans do not qualify for this deferment. You must be a full-time, paid volunteer in an ACTION program and serving for a period of at least one year. The cumulative maximum time limit for this deferment is 36 months.
If you’re not able to make payments and your situation does not qualify you for a deferment, you may request forbearance. There are several types of forbearance available.
Active Military Duty
For any Borrower serving in the National Guard not covered by the military deferment may request forbearance.
This forbearance is for borrowers who are not eligible for the military deferment. To be eligable for this forbearance, you have to be a member of the National Guard (including a retired member); called to active duty while still enrolled in school, or within six months after ceasing to be enrolled, on at least a half-time basis; and performing active military state duty during a period when the governor activates National Guard personnel. The service period must begin on or after October 1, 2007, or include that date. Forbearance is granted in periods up to 12 months at a time.
If you cannot make your regular payments and do not qualify for any other relief options, the hardship forbearance may be right for you.
You can qualify for this forbearance if you are willing but temporarily unable to make scheduled payments and do not qualify for a deferment or other type of forbearance. Forbearance is granted in periods of up to 12 months at a time.
Student Loan Debt Burden
If your payments total more than 20% of your gross monthly income, you may qualify for forbearance.
In order to qualify for this forbearance, your student loan payments must be equal to or greater than 20% of your total monthly income. You’ll need to provide proof of income as well as documentation of your monthly payments due on any Title IV loans not serviced by your current lender. Title IV loans include loans made under the Federal Family Education Loan Program (FFELP), Federal Direct Loan Program (FDLP), and Federal Perkins Loan Program. Forbearance is granted in periods of up to 12 months at a time with a cumulative maximum time limit of 36 months.