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Home » Student Finances

Student Loan Deferment, Forbearance, & Forgiveness Options

Last updated by on April 12, 2015

Student loan debt is a problem in the U.S. It has surpassed $1 trillion, and even surpassed credit card debt for the first time ever. I do not carry any student loans, but my wife and I are still paying off her original loans. Recently, she has decided to change careers and has gone back to school to get a second degree. In the process, she has learned a thing or two about student loans and put together this guest post. If you have any student loans or are considering a new degree, you should find some value.

My Student Loan Automatic Withdrawal Payments Stopped

Last year, as I started my second degree, I noticed that my automatic withdrawal of student loan payments (from my previous degree) had stopped. I had not requested this, so I called my loan service provider, Sallie Mae, to inquire.

What I found was that I did not have to make payments as long as I was enrolled in school for at least half time. And they had automatically enrolled me. This had me wondering if there were any other life circumstances which would grant student loan repayment relief, so I did a bit of research.

If you find yourself in a complicated life situation now or in the future consider some of these student loan repayment relief options: deferment, forbearance, and forgiveness. I’ll highlight each in more detail.

student loan deferment forbearance

Student Loan Deferment

Student loan deferment is a period during which repayment of the principal balance of your loan is temporarily delayed. Interest will not accrue on subsidized loans during the deferment period. Since my loans were subsidized, they were automatically deferred.

I was a returning student, but there are other circumstances that could lead to deferment. Who is eligible for deferment?

According to Federal Student Aid, a U.S. Dept. of Education resource, you are eligible for deferment during the following life circumstances;

  • You return to school and are at least half-time enrolled in a college, university, or career school
  • You study in an approved graduate fellowship program or in an approved rehabilitation training program for the disabled
  • You are unemployment or unable to find full-time employment for up to 3 years
  • You experience a period of economic hardship (includes Peace Corps service) for up to 3 years
  • You are under active military duty during a war, military operation, or national emergency
  • It has been within 13 months following the conclusion of qualifying active duty military service, or until you return to enrollment on at least a half-time basis, whichever is earlier

You can apply for deferment online through your lender. If you are enrolled in school you will probably want to contact your school’s financial aid office at the start/end of each semester. Do not assume they will automatically enroll you (or un-enroll you).

Unbeknown to me, my deferment period incorrectly ended this spring when I completed a “milestone” in my degree program. The financial aid office made it appear that I had completed my degree, so Sallie Mae removed me from loan deferment and I didn’t find out until large sums of money suddenly began withdrawing from my bank account automatically.

Student Loan Forbearance

There is another option for relief of student loan repayment if you do not qualify for deferment – student loan forbearance. According to Federal Student Aid forbearance allows you to stop making payments or reduce your monthly payment for up to 12 months.

There are two types of forbearances – discretionary and mandatory.

Who is eligible for forbearance?

Discretionary forbearance: under these circumstances, your lender decides if you are eligible for forbearance:

  • Financial hardship
  • Illness

Mandatory Forbearance: under these circumstances, your lender is required to grant forbearance:

  • You are serving in a medical or dental internship or residency program, and you meet specific requirements
  • The total amount you owe each month for all the student loans you received is 20% or more of your total monthly gross income (additional conditions apply)
  • You are serving in a national service position for which you received a national service award
  • You are performing teaching service that would qualify for teacher loan forgiveness
  • You qualify for partial repayment of your loans under the U.S. Department of Defense Student Loan Repayment Program
  • You are a member of the National Guard and have been activated by a governor, but you are not eligible for a military deferment

Receiving loan forbearance does not happen automatically. You need apply by making a request to your lender.

Deferment vs. Forbearance

With both deferment and forbearance, your payments are delayed. The difference is that with deferment, your interest on subsidized loans does not accrue. With forbearance, your interest will continue to accrue on unsubsidized AND subsidized loans. This makes deferment the better of the two, if you qualify for it.

Note that if you are in default on your loan, you are not eligible for either deferment or forbearance.

Student Loan Forgiveness, Discharge, & Cancellation

If you are a public employee, have a low income, or meet certain other criteria, it is possible that your loan debt could be forgiven, discharged, or cancelled.

There are many different criteria for each. I won’t go into full detail here, rather, just give you a list and link to some resources for you to dig in to deeper.

You may also want to look in to income based repayment, which allows you to legally cap your student loan payments at 15% of your income.

To become eligible for the income based repayment plan you must prove partial financial hardship as defined by your lender. But, it is possible to be making a substantial salary, even into six figures, and still qualify for Income-Based Repayment depending on your debt level. If you’re a public employee for 10 years, your loans could be forgiven after 10 years of repayment. After 25 years or 300 payments you could be granted loan forgiveness regardless of your career choice.

Student Loan Deferment, Forbearance, & Forgiveness Discussion:

Have you ever been granted deferment, forbearance, or forgiveness? Share your story!

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About the Author
I am G.E. Miller, & this is my story. My goal is financial independence ASAP. If you share that goal, join me & 10,000+ others by getting FREE email updates. You can also explore every post I have written, in order.

  • Nicholas says:

    My wife is a private school teacher, and eligable for forgiveness. We do not participate though. It’s not other folks responsibility to pay for our student loans. Someone in this world has to be fiscal responsible. Can’t just keep spending other peoples money.

    • Clint says:

      I appreciate and agree with this view. My wife and I managed to pay back all of our loans (27,000) on an income of 2500 a month. So there is no excuse to do what you and I have done.

    • Greg says:

      While I can appreciate your mentality, and applaud you for it, in the end you are only hurting yourselves. As a State employee, I didn’t go in to this job knowing about the student loan forgiveness program, but have every intention of using it to my full advantage.

      If I can get $2500 or whatever dollar figure of my loan forgiven, that’s another $2500 that I can put toward my house, or into my retirement savings. At the end of the day, nobody else will look after your best interests, and it’s your primary responsibility to do it for yourself.

      • Nicholas says:

        I am hurting no one. We believe its the moral thing to do – repay the loans you take out. I’m not interested in shifting my debt burdens onto anyone else, just as I don’t want anyone elses shifted onto me.

  • Kyle says:

    Great roundup of student loan options. I work for a non-profit organization so I’m very excited about this option. Other than that, I think the best thing to do is get creative about supplementing your income so you don’t have to solely rely on a salary that makes it hard to meet your payments (on top of other life expenses)

  • Marisa says:

    Has anyone succeeded in getting their interest rate for private student loans reduced? The rates on mine are high but when I asked about reducing them (no differently than I would with a credit card, for example) Sallie Mae just said no.

  • Emily @ evolvingPF says:

    My loans are deferred now because I’m in graduate school, but they were also deferred for a year when I had an “educational fellowship.” I wasn’t enrolled in school but it was a research program for people intending to enroll in MD or PhD programs and was funded by a fellowship.

  • Natalie H says:

    IBR payments are 15% of your discretionary income, not gross income. Discretionary income here is the difference between your AGI and 150% of poverty level for your family size and state. For example, my household income is $39k /year, but AGI is $33,500. My monthly payment under IBR is $80/month for a family of three in Nevada. This is a lot less than 15% of gross income.

  • kobe @ payday loans made easy says:

    Student Loan Debt is being highlighted topics since decades and the things have been prolonged to find a right way out. Loan Deferment or Forgiveness relaxes you for a time period but still there’s loads of debt which have to be repaid.

  • Sara says:

    I beg to differ on one thing. Sallie Mae actually ENROLLED ME on their own in a forbearance program I did NOT ask for. I was paying my student loan automatically through my bank’s bill pay system. I have been out of school for about 8 years. I re-enrolled in school to take some classes and Sallie Mae FOUND THIS OUT and automatically enrolled me in an in-school forbearance. I came across this site while I was searching for automatic enrollments by Sallie Mae! I am not going to stop paying on my loan, but I am SHOCKED that they did this without my permission! I did not call them or even TELL THEM I was back in school!

    • emma c says:

      I applied and was approved for forbearance due to being stupid and dropping a class after drop day.after that semester which was fall2012 I couldn’t pay my school 757 for that dropped class so I sat out during this spring term till I came up with the money, I did and have paid and am registered for summer session, I’m so excited.the question I have is my semester starts may 30th my forbearance isn’t expired till June 1st 2013 do I have to call to cancel this before attending summer term to get my loans to pay for class???


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