Student Loan Deferment

By: EconomyWatch Content   Date: 24 November 2009

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Student loan deferment allows one to temporarily suspend making payments due to crises, such as economic hardship and unemployment. A person is responsible for repaying his debt even after being granted deferment. The interest rate on a student loan also does not change in case of deferment.

Student Loan Deferment: Options

The student loan deferment options available to a borrower depend on the type of loan held. In the case of a Stafford and Perkins loans, the payment of the principal and the interest may be deferred if the borrower is:

  • Attending school at least for half the time

  • Unemployed (deferment is granted for a maximum period of three years)

  • Experiencing economic hardship (deferment is granted for a maximum period of three years)

  • Studying in an approved graduate fellowship or rehabilitation program for the disabled.

  • Military Service deferment is granted to military service members on active duty during a war, military operation or national emergency.

In the case of the Parent Loan for Undergraduate Students (PLUS), the deferment is allowed if the parent borrower meets any of the above conditions. The deferment options for private student loans vary from lender to lender. 

Student Loan Deferment: Interest rates

A borrower does not have to pay the interest on a loan for a Stafford or Perkins loan. However, in case of unsubsidized loans, the borrower is responsible for the interest during deferment. In case the interest is not paid as it accrues, the lender will capitalize the same and add to the loan principal, thus raising the due amount.

A borrower should continue making payments till he has been granted student loan deferment. Otherwise, the loan could become delinquent or go into default.

Student Loan Deferment: Forbearance

In case a student or a parent does not qualify for student loan deferment, he can apply for forbearance. A temporary postponement or reduction of payments is allowed if the borrower is experiencing financial difficulty. In the case of forbearance, the interest on the loan continues to accrue and the borrower has the responsibility to pay for it.

Forbearance may also involve an extension of time to make payments or acceptance of smaller payments. Unlike deferments, forbearance may be granted if one is already in default.


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