You can have your student loan deferred when certain circumstances arise. Deferment or forbearance gives you the opportunity to stop making any payments temporarily. This could also mean a reduction in the total sum of money to be repaid.
However, you need to proceed with payments until the student loan deferment is granted. Your loan servicer / company will guide you on how to apply for a deferment or forbearance. In most cases, you will have to fill out a student loan deferment form.
After submitting the application, the loan company will inform you if your application has been granted or not.
Are deferment and forbearance the same?
The major distinguishing factor between deferment and forbearance is that you may not pay for the interest that accumulates on certain loans as the deferment period runs its course.
When you are granted deferment, there is no obligation to pay for the interest that adds up on loans like Direct Subsidized Loans, Federal Perkins Loans, and Subsidized Federal Perkins Loans.
However, in course of the deferment, you are held accountable for the payment of interest on loans, such as Direct Unsubsidized Loans, Direct Plus Loans, Unsubsidized Federal Stafford Loans, and so on.
On the other hand, you are supposed to pay for the interest on all kinds of Federal Student Loans during forbearance. If your loan was deferred or got a forbearance then the interest can be repaid as it accumulates, or you can let it accumulate and be capitalized until the deferment and forbearance period ends. When your interest is added, the entire amount will be higher.
You can only capitalize your unpaid interest if it’s a Direct Loan or FEEL Program Loan. This is not obtainable if it’s a Perkins Loan.
How to get deferment or forbearance?
Obtaining a deferment or forbearance is not automatic. A request must be made through the loan servicer via a student loan deferment form.
In most cases, you must furnish your loan servicer with documents proving that you’re qualified for a deferment or forbearance. Students who get admitted into qualified colleges have more opportunity to have their loans placed on deferment.
If you’re enrolled at half-time and don’t get a notification of automatic deferment, the best thing to do is to inform your school immediately.
It is the responsibility of your school to handle such matters. They will inform your loan company of the current development and ask that your loan is placed on deferment.
The mistake that most students make is they stop making payments immediately after they apply for deferment or forbearance. The result will be that your application for deferment and forbearance is denied. Then, your student loan will be marked as delinquent. This will also result in a default loan repayment.
What qualifies you for deferment?
You will be entitled to a deferment on the federal student loan:
• If you don’t have a job for 3 years.
• If you have been volunteering with the Peace-Corps for 3 years.
• If you are engaged in a military operation that involves going to war for 1 year and one month. The deferment period will end when you resume studies in a college or career school, even on a half-time base.
• If you were admitted into a rehabilitation training program.
• If you get admitted into a graduate fellowship program that is approved.
• If you were admitted into a suitable college or career school.
What makes you qualified for forbearance?
The kind of forbearance will determine if you’re qualified or not. Forbearance has 2 types and they are: General and Forced Forbearance.
General Forbearance – The responsibility is on the loan servicer to grant the request for forbearance or not. You can make this request if you can’t make your monthly or weekly payments as scheduled.
You may give reasons for the non-payment of your monthly returns.
Some of the reasons may be a shift in employment, medical expenses, or financial difficulties. If your loan servicer is okay with your reasons for the request, then it will be granted.
Loans, where General Forbearance can be granted, are Direct Loans, FEEL program and Perkins Loan. The time limit for General Forbearance is not more than twelve months per request.
If your financial status has not improved, you can make another request for General Forbearance.
If your loan is a Perkins Loan, you will get a cumulative limit of 3 years. Meanwhile, for Direct and FEEL Program loans, there isn’t any static cumulative limit. It is at the discretion of your loan servicer to fix a time limit for General Forbearance.
Forced Forbearance – This is not at the discretion of the loan servicer. If you qualify for a Forced Forbearance, the loan servicer has no choice but to grant it.
The following will qualify you for a Forced Forbearance:
• If you’re rendering any service as a medical or dental intern. This will only apply to Direct Loans and the FEEL Programs loan.
• If the entire amount you’re supposed to pay on your monthly payment is above your monthly income by 20% for 3 years. You can get this if your loan was obtained as Direct loans, FEEL program loans and Perkins loan.
• If you are currently serving as an AmeriCorps and was also given a National Service award. This applies to Direct Loans and FEEL Programs only.
• If you are engaged in a teaching service that could make you suitable for teacher loan forgiveness. Applicable to only Direct Loans and FEEL programs loans.
• If you are qualified for repayment of your loan partially by the U.S. Department of Defense student loan program.
• If you are a member of the National Guard who is not qualified for a deferment but activated by the state governor.
The time limit for Mandatory Forbearance is 12 months. You can request for Mandatory Forbearance after your time limit expires as long as you meet the criteria.
The truth is that deferment and forbearance are temporary measures. The best option is to switch to an income-based repayment plan. This simply means that the monthly payments will be based on your income, size of family, etc.