Savanna Hoffman
Having a baby is stressful enough without the added anxiety of student loan repayments. In the US, there is no requirement for employers to provide paid parental leave, and taking maternity leave without pay can make it difficult to keep up with monthly loan payments. However, there are options to help. If you have federal student loans, you may be eligible for a temporary payment modification, such as deferment or forbearance. Deferment and forbearance allow you to pause your student loan payments for a period of time, freeing up cash for other expenses. Interest will likely accrue during this time, and it rarely counts toward loan forgiveness programs. If you have private student loans, it is still worth reaching out to your lender to see if they offer deferment, forbearance, or adjusted repayment options.
| Characteristics | Values |
|---|---|
| Maternity leave | Paid or unpaid |
| Student loan | Federal or private |
| Federal student loan | May be eligible for temporary payment modifications |
| Temporary payment modifications | Deferment or forbearance |
| Deferment or forbearance | Interest accrues |
| Interest | Interest accrues on Direct Unsubsidized Loans, Direct PLUS Loans, and Direct Unsubsidized Consolidation Loans in the case of deferment; Interest accrues on all types of Direct Loans in the case of forbearance |
| Private student loan | Reach out to the lender to see whether it offers deferment, forbearance, or adjusted repayment options |
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What You'll Learn
Federal student loan deferment
If you have federal student loans and are going on maternity leave, you may be eligible for a temporary pause in your loan payments. This is known as a deferment or forbearance. Deferment and forbearance are options that can help free up cash for other expenses while you are on maternity leave.
A deferment is a temporary postponement of your student loan payments in specific situations, such as active military service or reenrollment in school. You can apply for a deferment with your loan servicer, and if approved, you won't have to make payments during the deferment period. The U.S. Department of Education has published a list of reasons that qualify for deferment.
If you are on maternity leave, you may qualify for a deferment if you can demonstrate financial need or a change in income. Interest may accrue during the deferment period, depending on the type of loan you have. For subsidized loans, you don't have to pay interest during deferment, but for unsubsidized loans, you are responsible for the interest. If you don't pay the interest, it will be added to your loan balance, increasing the overall amount you have to pay.
It's important to note that deferment for maternity leave may have strict eligibility requirements and only applies to certain federal loans disbursed before July 1, 1993. Under the Federal Family Education Loan Program, parental leave deferment can be up to six months, and working mothers can be eligible for up to 12 months.
Alternative Options
If you have private student loans, reach out to your lender to discuss deferment, forbearance, or adjusted repayment options. They may be willing to work with you to find a solution, such as hardship assistance or a promise-to-pay agreement.
Additionally, consider income-driven repayment (IDR) plans, which allow you to modify your federal student loan payments based on a small percentage of your discretionary income. This can help reduce your monthly payments while on maternity leave without necessarily requiring a deferment or forbearance.
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Forbearance
If you are going on maternity leave and have student loans to pay, you may be able to pause your loan payments temporarily if you qualify for forbearance or deferment. Forbearance and deferment are options that can postpone your monthly payments, freeing up cash for other expenses or savings until you are back to work. However, interest will likely accrue during this period, and it rarely counts toward loan forgiveness programs.
General forbearance, also known as discretionary forbearance, is granted at the loan servicer's discretion. You can request this type of forbearance if you're experiencing financial difficulties, medical expenses, or other reasons. Mandatory forbearance, on the other hand, has specific eligibility requirements related to your income, employment status, or participation in certain loan repayment plans.
If you have private student loans, lenders like Sallie Mae may offer forbearance in cases of financial difficulty. However, approval is not guaranteed, and you may need to demonstrate financial need or a change in income. Additionally, you may be required to make a "good faith" payment to participate in the forbearance program.
Deferment
Deferment is another option to postpone your student loan payments during maternity leave. The main difference between deferment and forbearance is how interest accrues. With deferment, interest only accrues on specific loan types, such as Direct Unsubsidized Loans and Direct PLUS Loans. The accrued interest is capitalized and added to your principal balance, resulting in higher overall costs.
If you have federal student loans, you may qualify for deferment under the Federal Family Education Loan Program if your loans were disbursed before July 1, 1993. This program offers parental leave deferment for up to six months and working mothers' deferment for up to 12 months. Strict eligibility requirements must be met, and documentation such as a physician's statement of pregnancy or a birth certificate is required.
Whether you have federal or private student loans, forbearance and deferment can provide temporary relief from loan payments during maternity leave. However, interest accrual during this period can increase your overall loan costs. It is important to carefully consider your options, communicate with your loan servicer or lender, and make informed decisions based on your financial situation.
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Private student loan options
If you have private student loans, your options are different from those with federal loans. For example, Sallie Mae offers forbearance, but it is typically in the case of financial hardship. Your lender may approve forbearance during maternity leave, but it may be difficult to get approved. If you are approved, you could get a forbearance of three months, with the possibility of extending it for up to 12 months. You might have to pay a "good faith" payment of up to $150 to participate in this program.
If you can still afford to make some contribution toward your student loans but would like to lower your payments, consider an income-driven repayment plan (IDR). Under IDR, you can modify your federal student loan payments so that they're a small percentage of your discretionary income.
If you have private student loans, reach out to your lender to see whether it offers deferment, forbearance, or adjusted repayment options. Even if there is no advertised opportunity, it is still worth communicating your financial situation. Your lender might be willing to leverage hardship assistance, work out a promise-to-pay agreement, or extend similar benefits during your maternity leave.
If your parental leave covers your financials, and you can afford it, keeping your student loan payments as-is is likely best. However, if your income will be reduced due to leave, you may want to pause your monthly payments. You can also consider lowering your payments to make them more manageable.
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Budgeting for maternity leave
Understand your company's maternity leave policy:
Contact your HR department to learn about your company's maternity leave policy, including the duration of leave, payment options, and any conditions you need to meet to qualify. Ask about the possibility of leveraging sick days, vacation days, or short-term disability for paid leave.
Estimate your expenses and income:
Calculate your expected expenses during maternity leave, including medical costs, childcare, and any additional expenses related to the newborn. Then, determine your income sources during this period, such as statutory maternity pay (SMP), savings, or partner's income.
Create a maternity leave budget:
Develop a budget specifically for your maternity leave. This can be a separate budget, earmarked funds, or an adjustment to your usual household budget. Consider using a budget template to help you organize your finances and identify any shortfalls.
Explore options for student loan payments:
If you have student loans, contact your loan servicer to discuss options for deferment, forbearance, or adjusted repayment plans. Federal loans may offer temporary payment modifications, while private lenders may provide some flexibility based on your financial situation.
Save ahead if needed:
If you anticipate a deficit during your leave, consider saving up a pot of money in advance to supplement your income. Work towards a savings goal that aligns with your estimated expenses and income.
Stay organized and informed:
Regularly review and adjust your budget as needed. Stay informed about the benefits available to you and your partner through your employers, as well as any government assistance programs or parental leave policies that may provide financial support during this time.
Remember, budgeting for maternity leave is a personalized process, and your specific circumstances will shape your approach. Taking early action and staying proactive about your finances will help ensure a smooth and enjoyable transition into parenthood.
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Parental leave and income
Taking parental leave can significantly impact your income, especially if you're going on unpaid leave. This can make it difficult to keep up with your monthly student loan payments.
If you're planning to take parental leave, it's important to prepare financially, especially if your leave is unpaid. Here are some things to consider:
- Understand your income during leave: Find out whether your employer offers paid parental leave and how much you can expect to receive. This will help you anticipate any income reduction and plan your budget accordingly.
- Review your expenses: Identify areas where you can cut back on spending during your leave. This may include reducing discretionary expenses, such as eating out or non-essential purchases.
- Explore loan repayment options: If you have federal student loans, you may be eligible for a deferment or forbearance, which temporarily pauses or reduces your loan payments. Contact your loan servicer to discuss your options and understand the eligibility requirements.
- Communicate with your lender: If you have private student loans, reach out to your lender to discuss your options. They may offer deferment, forbearance, or adjusted repayment plans, especially if you demonstrate financial hardship.
- Consider an income-driven repayment plan: If you can still afford to make payments but want to lower the amount, an income-driven repayment plan (IDR) may be an option. Under an IDR, your federal student loan payments are adjusted to a small percentage of your discretionary income.
- Start planning early: Don't wait until your child arrives to adjust your budget. The sooner you start planning and saving, the better prepared you will be during your parental leave.
Managing student loans during parental leave
- Contact your loan servicer: If your budget is stretched thin during leave, reach out to your loan servicer to discuss your options. They may be able to provide temporary payment modifications or alternatives.
- Understand deferment and forbearance: Deferment and forbearance allow you to temporarily pause or reduce your student loan payments. Interest may still accrue during this period, so be sure to understand the terms of these options before choosing one.
- Make extra repayments: If you have the financial means, consider making extra repayments to your student loans to reduce the overall loan amount. There is no penalty for early repayments, and this can help lessen your financial burden in the long run.
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Frequently asked questions
It depends on the type of loan and your financial situation. If you have federal student loans, you may be eligible for a deferment period or forbearance. Contact your loan servicer to discuss your options.
Deferment and forbearance allow you to pause or reduce your student loan payments during maternity leave. The main difference is how interest accrues. During deferment, interest only accrues on Direct Unsubsidized Loans, Direct PLUS Loans, and Direct Unsubsidized Consolidation Loans. The accrued interest is added to your principal balance, and future interest is assessed on the new total balance. During forbearance, interest accrues on all types of Direct Loans (both subsidised and unsubsidised), but the accrued interest is not capitalised and does not add to the outstanding principal.
If you have private student loans, reach out to your lender to discuss your options. Some lenders may offer deferment, forbearance, or adjusted repayment plans during maternity leave. It is important to communicate your financial situation and explore potential solutions.
It is important to plan ahead and make a budget that considers your expenses, monthly bills, and loan obligations during maternity leave. Identify areas where you can cut back on spending, such as eating out or non-essential purchases. Start saving and adjusting your budget as early as possible to ease the financial burden during maternity leave.
