Savanna Hoffman
If you're struggling to repay your student loan, there are several options to consider to delay repayment. The most common ways to pause your payments are student loan forbearance and student loan deferment. Forbearance is when your lender gives you a break in payments for a set amount of time, usually 12 months, and there is a limit to how many times you can request it. Deferment lets you temporarily reduce or postpone payments on your loan(s) if you’re returning to college, going to graduate school, or entering an internship, law clerkship, fellowship, or residency. It is important to note that interest will continue to accrue during the forbearance and deferment periods, increasing the total loan cost.
| Characteristics | Values |
|---|---|
| Student loan deferment | A temporary pause in payments, allowing you to reduce or postpone them. |
| Student loan forbearance | A break in payments for a set time, usually 12 months, with a limit on how often you can request it. |
| Sallie Mae Deferment | Up to 48 months for undergraduate and graduate loans, and up to 60 months for specific graduate programs. |
| Sallie Mae Deferment Request | Requires verification of enrollment in a qualifying program. |
| Alternatives | Income-driven repayment plans, scholarships, grants, work-study, federal loans, and private loans. |
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What You'll Learn
Student loan forbearance
Federal Student Loans
If you have a federal student loan, your loan servicer can grant forbearance for up to 12 months at a time. You will generally need to apply to your loan servicer for forbearance, often over the phone, and continue making payments until your forbearance request is approved. It is important to note that interest will continue to accrue on your loan during the forbearance period. You can choose to pay the interest during this period or have it added to the balance of your loan when the forbearance ends.
Private Student Loans
Private student loan forbearance varies and is typically more limited than federal loan forbearance. The terms and fees associated with postponing private student loan payments depend on your contract and applicable laws, and may differ for each servicer. Private student loan forbearance may not offer the same favourable terms as federal student loan forbearance.
Alternative Options
If you are unable to afford your student loan payments, there are alternative options available. You may be eligible for a deferment, which temporarily reduces or postpones your loan payments if you are returning to college, attending graduate school, or participating in an internship, law clerkship, fellowship, or residency program. Unlike forbearance, interest does not accrue during deferment on subsidized federal student loans. You may also be able to enrol in an income-driven repayment plan or explore other repayment options that lower your monthly payment.
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Student loan deferment
A student loan deferment is a way to temporarily reduce or postpone loan payments if you're returning to college, going to graduate school, or entering an internship, law clerkship, fellowship, or residency program. Deferment is also an option for those who are reenrolling in school or serving in the military.
To request a deferment, you must apply to your loan servicer, and you will need to continue making payments until your deferment is approved. You can request a deferment in increments of up to 12 months, with a maximum deferment period of 60 months for undergraduate loans and 48 months for graduate loans. During the deferment period, interest will continue to accrue, increasing the total loan cost. If you have a subsidized loan, you won't be charged interest during the deferment period, but if you have an unsubsidized loan, you will be responsible for the interest.
If you are having difficulty making your student loan payments, there may be other options available to you, such as forbearance or income-driven repayment plans. It is important to contact your loan servicer as early as possible to discuss these options and explore the best solution for your situation.
For Sallie Mae loans, you can request a deferment of up to 48 months for undergraduate or graduate student loans as long as you are enrolled at least half-time. Your school will need to verify your enrollment, which can be done electronically if your school is listed on studentclearinghouse.org. You can also request to have the deferment period removed at any time if you wish to return to making principal and interest payments.
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Income-driven repayment plans
Income-driven repayment (IDR) plans are designed to help student loan borrowers manage their loan repayments when they have a low income. IDR plans set repayments as a fraction of discretionary income, rather than a fixed payment for ten years. This means that borrowers pay a percentage of their income, which can be beneficial when income is low or unpredictable.
IDR plans have been criticised for their complexity, and many borrowers have struggled with the system, sometimes missing their annual recertifications. The newest IDR plan, developed by the Biden administration, is currently subject to litigation, and its future is uncertain. However, it is likely that Congress will resolve this through the reconciliation process.
The House has passed a bill to replace existing IDR plans with a new program, the Repayment Assistance Plan (RAP). This plan will include a minimum monthly payment of $10, regardless of the borrower's income. This is a significant change from the current IDR plans, where borrowers with an income below the 'protected income threshold' (between 100-225% of the federal poverty line) are not required to make any payments at all.
The benefits of a minimum payment are twofold. Firstly, it encourages borrowers to engage with the repayment system and develop good habits around loan repayment. Secondly, it emphasises accountability and the fact that loans are not the same as grants. However, critics argue that even a small payment of $10 per month could be a real financial hardship for some borrowers.
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Direct Consolidation Loans
Most federal loans are eligible for consolidation, but private loans are not. The application for a Direct Consolidation Loan is free, and it is managed by the U.S. Department of Education. Borrowers with Direct Consolidation Loans will have a single monthly payment and a single lender (the U.S. Department of Education) instead of multiple payments and lenders.
The repayment period for a Direct Consolidation Loan can vary from 10 to 30 years, depending on the loan amount. While the fixed interest rate simplifies repayment, borrowers may end up paying more interest over the loan's lifetime due to the extended repayment period. Additionally, borrowers may lose benefits associated with their original loans, such as interest rate discounts and rebates.
To obtain a Direct Consolidation Loan, a borrower must submit a completed application to the Secretary. This application process includes confirming the loans to be consolidated and agreeing to repay the new loan. It is essential for borrowers to carefully consider the benefits associated with their original loans before consolidating, as some advantages may be lost in the process.
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Additional financial aid
If you are struggling to make your loan payments, you can apply for a deferment or forbearance to temporarily reduce or postpone your payments. Interest will continue to accrue during this period, increasing your total loan cost. You can apply for a deferment in increments of up to 12 months, up to a maximum of 60 months for undergraduate loans and 48 months for graduate loans.
Forbearance is another option if you are experiencing financial hardship. It allows you to temporarily pause or lower your payments, but interest will accrue if your principal remains unpaid. Refinancing is a further option, where you replace your existing loan with a new one that has a new interest rate and terms. This can help make payments more manageable by consolidating multiple loans into one loan, potentially at a lower interest rate.
If you are having trouble keeping track of and paying multiple federal student loans, you may be able to combine them into one loan at a lower interest rate through Direct Consolidation Loans. This can simplify your payments and reduce your overall interest costs.
It is important to carefully consider your unique financial situation and seek advice from a financial advisor or expert before making any decisions regarding loan deferment, forbearance, or refinancing. These options can provide temporary relief, but interest accrual may increase your overall financial burden in the long run.
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Frequently asked questions
You can delay paying back your student loans through student loan forbearance or student loan deferment. Forbearance is when your lender gives you a break in payments for a set amount of time, usually 12 months. Deferment lets you temporarily reduce or postpone payments on your loan(s) if you’re returning to college, going to graduate school, or entering an internship, law clerkship, fellowship, or residency.
To apply for forbearance, contact your loan servicer and ask about programs that suspend loan payments. To apply for deferment, download and fill out a form from your lender's website. For example, Sallie Mae offers an In-School Deferment Request Form.
While forbearance and deferment can help you avoid falling behind on payments, they are not a perfect solution. Interest will continue to accrue (grow) during the forbearance or deferment period, increasing your total loan cost.
