Loan Deferment

Author:

Moneyzine Editor

1 mins

September 25th, 2023

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Definition

The term loan deferment is used to describe programs that allow a student to temporarily reduce or halt payment on a loan.

Explanation

Also known as forbearance, a deferment allows for principal payments to be delayed. In addition, the federal government may pay the interest charges for Federal Perkins Loans, Direct Subsidized Loans, and Subsidized Federal Stafford Loans during the deferment period. Unsubsidized Perkins, Stafford and PLUS loans are also eligible for deferment; however, the unpaid interest charges will accrue to the principal of the loan.

There are four general categories of loan deferment:

In-School Deferment: as long as the student is attending school at least half-time, payment on the student loan can be deferred for up to three years.
Unemployment Deferment: students with outstanding loans may be eligible for an unemployment deferment for up to three years after they halt attendance at a school.
Economic Hardship Deferment: the student borrower must demonstrate need via a statement of annual earnings that are below certain wage income guidelines established by the Bureau of Labor Statistics. The student is eligible for an economic hardship deferment for up to three years, and must reapply each year.
Military Deferment: former students serving a period of active military duty during a war, while on military operations, or during a national emergency may be allowed to defer payment of their loans.

Arrangements for any type of student loan deferment must be agreed to with the loan servicing institution.

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