Students are burdened with student loan debt like never before. Americans owe over $1.4 trillion in student loan debt and the average graduate walks away with $37,172 in debt. Keeping up with your payments can be difficult, especially if you’re facing hardships like unemployment or a medical emergency.
If you’re in a tough spot, you have options you can use so you don’t default on your loans. If you have federal student loans, you can use deferment or forbearance to get through a rough patch. While using either option is not ideal, they can be a tool to help you get back on your feet.
Student loan deferment
Student loan deferment is a federal repayment option that allows you to pause your student loan payments for up to three years. Depending on the type of loan you have, you may not be responsible for interest charges that accrue on your loan.
If you defer your student loans, you can stop making payments without entering default or damaging your credit. That can free up money in your budget to pay for other demands, such as medical bills or rent. Having that breathing room can allow you to focus on getting your finances back on track.
If you have subsidized student loans, the government will pay interest that accrues while your debt is in deferment.
If your loans are unsubsidized, the government won’t cover the interest that accrues on your debt. That means your loan balance can grow while you’re in deferment and you can end up paying back thousands more in interest once deferment is over.
How to apply for student loan deferment
To be eligible for student loan deferment, you must meet one of the following criteria:
- You are enrolled at least half-time at a qualifying university.
- You are unemployed or unable to find a full-time job.
- You are experiencing an economic hardship or serving in the Peace Corps.
- You are on active duty military service.
Deferments are not automatic. To request a deferment, you must complete an Unemployment Deferment Form, In-School Deferment Form, or Economic Hardship Form. You should send the appropriate form and documentation showing you meet the eligibility requirements to your loan servicer for their review.
If you don’t qualify for student loan deferment for whatever reason, you might still be able to pause monthly payments through student loan forbearance.
Student loan forbearance
Like student loan deferment, you can postpone student loan payments or lower monthly payments via forbearance. If you qualify for forbearance, you can stop making payments for up to 12 months.
There are two types of forbearance: mandatory and discretionary.
With mandatory forbearance, the government requires loan servicers to grant you a forbearance if you meet one of the following criteria:
- You are serving in a medical or dental residency program.
- The monthly payment on your loans is 20 percent or more of your gross income.
- You are a teacher serving in an area that would qualify you for Teacher Loan Forgiveness.
- You are serving in an AmeriCorps position.
Under discretionary forbearance, your loan servicer decides whether or not you qualify. You may be eligible if have financial difficulties, medical expenses, or other acceptable cause.
If you’re facing a short-term emergency, such as a job loss, forbearance can give you much-needed relief while you get back on track. By getting your payments reduced or eliminated for a short time, you can get your finances in order without falling behind on your loans.
Forbearance can be a useful option if you’re facing money problems, but there are some consequences to consider. Interest continues to accrue on your loans when you’re in forbearance and you’re responsible for paying that back, regardless of your loan type. That can add to the cost of your loans and make it harder to become debt-free.
However, forbearance is still a smarter option than not making payments and risking student loan default.
How to apply for forbearance
If you’re applying for a discretionary forbearance, you must complete the General Forbearance Request Form and submit it to your lender.
For mandatory forbearance applications, you need to complete the form that matches your situation, such as the Student Loan Debt Burden Forbearance Form, Medical/Dental Residency Form, or AmeriCorps Service Form. Send the form with documentation to back up your claim to your loan servicer.
Before applying for deferment or forbearance
When you apply for deferment or forbearance, remember that you must keep making student loan payments until your loan servicer notifies you that they’ve accepted your request. Otherwise, you could become delinquent on your loans.
Even though deferment or forbearance can extend your repayment term and cause interest charges to build up, either option is preferable to entering into default. These two programs can provide much-needed relief if you’re facing a financial emergency.
For more information about federal loan repayment options, learn how to lower your payments with income-driven repayment plans.
Interested in refinancing student loans?Here are the top 6 lenders of 2018!
|Lender||Variable APR||Eligible Degrees|
|Check out the testimonials and our in-depth reviews!
1 Important Disclosures for Earnest.
To qualify, you must be a U.S. citizen or possess a 10-year (non-conditional) Permanent Resident Card, reside in a state Earnest lends in, and satisfy our minimum eligibility criteria. You may find more information on loan eligibility here: https://www.earnest.com/eligibility. Not all applicants will be approved for a loan, and not all applicants will qualify for the lowest rate. Approval and interest rate depend on the review of a complete application.
Earnest fixed rate loan rates range from 3.89% APR (with Auto Pay) to 5.87% APR (with Auto Pay). Variable rate loan rates range from 2.47% APR (with Auto Pay) to 5.87% APR (with Auto Pay). For variable rate loans, although the interest rate will vary after you are approved, the interest rate will never exceed 8.95% for loan terms 10 years or less. For loan terms of 10 years to 15 years, the interest rate will never exceed 9.95%. For loan terms over 15 years, the interest rate will never exceed 11.95% (the maximum rates for these loans). Earnest variable interest rate loans are based on a publicly available index, the one month London Interbank Offered Rate (LIBOR). Your rate will be calculated each month by adding a margin between 1.82% and 5.50% to the one month LIBOR. The rate will not increase more than once per month. Earnest rate ranges are current as of Month/Day/Year, and are subject to change based on market conditions and borrower eligibility.
Auto Pay discount: If you make monthly principal and interest payments by an automatic, monthly deduction from a savings or checking account, your rate will be reduced by one quarter of one percent (0.25%) for so long as you continue to make automatic, electronic monthly payments. This benefit is suspended during periods of deferment and forbearance.
The information provided on this page is updated as of 08/21/18. Earnest reserves the right to change, pause, or terminate product offerings at any time without notice. Earnest loans are originated by Earnest Operations LLC. California Finance Lender License 6054788. NMLS # 1204917. Earnest Operations LLC is located at 302 2nd Street, Suite 401N, San Francisco, CA 94107. Terms and Conditions apply. Visit https://www.earnest.com/terms-of-service, email us at email@example.com, or call 888-601-2801 for more information on ourstudent loan refinance product.
© 2018 Earnest LLC. All rights reserved. Earnest LLC and its subsidiaries, including Earnest Operations LLC, are not sponsored by or agencies of the United States of America.
2 Important Disclosures for Laurel Road.
Laurel Road Disclosures
Savings example: average savings calculated based on single loans refinanced from 9/2013 to 12/2017 where borrowers’ previous rates were disclosed. Assumes same loan terms for previous and refinanced loans, and payments made to maturity with no prepayments. Actual savings for individual loans vary based on loan balance, interest rates, and other factors.
Application detail: 5 minutes indicates typical time it takes to complete application with applicant information readily available. It does not include time taken to provide underwriting decision or funding of the loan.
Instant rates mean a delivery of personalized rates for those individuals who provide sufficient information to return a rate. For instant rates a soft credit pull will be conducted, which will not affect your credit score. To proceed with an application, a hard credit pull will be required, which may affect your credit score.
Total savings calculated by aggregating individual average savings across total borrower population from 9/2013 to 12/2017. Individual average savings calculation based on single loans refinanced from 9/2013 to 12/2017 where borrowers’ previous rates were provided. Assumes same loan terms for previous and refinanced loans, and payments made to maturity with no prepayments. Actual savings for individual loans vary based on loan balance, interest rates, and other factors.
3 Important Disclosures for SoFi.
4 Important Disclosures for LendKey.
Refinancing via LendKey.com is only available for applicants with qualified private education loans from an eligible institution. Loans that were used for exam preparation classes, including, but not limited to, loans for LSAT, MCAT, GMAT, and GRE preparation, are not eligible for refinancing with a lender via LendKey.com. If you currently have any of these exam preparation loans, you should not include them in an application to refinance your student loans on this website. Applicants must be either U.S. citizens or Permanent Residents in an eligible state to qualify for a loan. Certain membership requirements (including the opening of a share account and any applicable association fees in connection with membership) may apply in the event that an applicant wishes to accept a loan offer from a credit union lender. Lenders participating on LendKey.com reserve the right to modify or discontinue the products, terms, and benefits offered on this website at any time without notice. LendKey Technologies, Inc. is not affiliated with, nor does it endorse, any educational institution.
5 Important Disclosures for CommonBond.
6 Important Disclosures for Citizens Bank.
Citizens Bank Disclosures
|2.47% – 6.99%3||Undergrad & Graduate|
|2.47% – 5.87%1||Undergrad & Graduate|
|2.47% – 8.03%4||Undergrad & Graduate|
|2.95% – 6.37%2||Undergrad & Graduate|
|2.48% – 6.25%5||Undergrad & Graduate|
|2.72% – 8.32%6||Undergrad & Graduate|