Here is some basic information!

What it is:  A Deferment designed if you work full time but don’t make enough money or are on state and/or federal assistance

Eligibility Requirements: You have to work at least 30 hours and make with 150% of the poverty line based on your family size or be receiving state and federal assistance such as food stamps or cash assistance.

How long is this Deferment for:  For post 7/1/93 loans (many rules were different before then) you get 3 years of deferment.  You can get up to a year at a time if based on income and if based on assistance, it will run through when your assistance ends (up to a year).

Why it may not be the best idea:  Traditionally if you are making the amount of money needed to qualify for this deferment, you will also qualify for an Income Driven Repayment plan.  Often times this plan can be at $0.00.  If this is the case the IDR would be more beneficial so explore all your options first!

 

What it is: A deferment designed if you are working less than 30 hours and collecting Unemployment Benefits or registered with an employment agency

Eligibility Requirements: Interestingly you don’t have to be unemployed to qualify for this deferment and being unemployed is not enough. As indicated above, one must be working less than 30 hours a week, actively seeking work, and either certified with an employment agency or receiving Unemployment benefits.

How long is this Deferment for: For post 7/1/93 loans (many rules were different before then) you get 3 years of deferment. You can use up to 6 months at a time for this deferment.

Why it may not be the best idea: Similar to the Economic Hardship Deferment, in most cases you will qualify for a $0.00 IDR in these situations, which is more advantageous than the deferment. Remember even with no income, you can still qualify for Income Driven plans!

 

What it is:  A deferment to place your loans on hold if you are attending school as at least a half-time student

Eligibility Requirements: The only requirement for this deferment is that you are currently enrolled at a Department of Education school at least half time.  Your school determines your enrollment status.

How long is this Deferment for:  This is an unlimited deferment that lasts as long as you meet the above criteria

Why it may not be the best idea:  You can make payments while on a Deferment so generally this is not a bad plan with one exception.  If you are making payments towards Public Service Loan Forgiveness, you cannot make a qualifying payment while in deferment status so to avoid any interruptions, leaving your account in this status would be detrimental.

 

What it is: A forbearance designed to help you if your student loan debt takes up a significant portion of your income.

Eligibility Requirements:   How significant?  20% to be exact.  If your monthly loan payment is 20% of your monthly gross income, you will qualify for this forbearance.

How long is this Forbearance for: For post 7/1/93 loans (many rules were different before then) you get 3 years of forbearance. You can use up to 12 months at a time for this forbearance

Why it may not be the best idea: During this forbearance, interest still accrues so if you are able to get on an Income Driven plan or qualify for a deferment it is a better idea.  However since you do have to qualify for it, it is often a better idea than the General Forbearance so you still can keep that forbearance available if needed

 

What it is: It’s name says it all.  This forbearance is a catchall for all of life’s general things that makes it not possible to pay.  The list runs from covering processing time to not being able to pay one month because of unexpected car expenses.

Eligibility Requirements: There are none!  As long as you have time left, you can use it for any reason.

How long is this Forbearance for: For post 7/1/93 loans (many rules were different before then) you get 3 years of forbearance. You can use up to 12 months at a time for this forbearance

Why it may not be the best idea: During this forbearance, interest still accrues so if you are able to get on an Income Driven plan or qualify for a deferment it is a better idea.  Also do remember once it is gone it is gone and you can’t get it back.

 

Depending on the age of your loans there are two types of Military Deferments: Military Armed Forces Deferment and Military Service Deferment.  In order to qualify for the Armed Forces Deferment, your Stafford Loans must be disbursed prior to July 1, 1993, your PLUS loans before August 15, 1983 and Consolidation Loans are not eligible.  A borrower must be on active duty with their branch for one year.

For the Military Service Deferment, prior to October 1, 2007 this deferment was only available to loans disbursed on or after July 1, 2007.  However as of October 1, 2007 this deferment is available to anyone who meets the requirements.  The requirements are anyone one of the three:

a) A reserve order to active duty

b) A retired member ordered to active duty for service in connection with a war or other military or national emergency, regardless of location

c) Any other member of the Armed Force on active duty in connection with the emergency or war connection, who has been assigned to duty station at a location other than the location where the member is normally assigned.

 

Made up of the following 3 forbearances:

  • Internship / Residency Forbearance
  • National Guard Duty Forbearance
  • Department of Defense Forbearance

Internship Residency Forbearance:

Borrower must be enrolled in internship or residency program; to qualify borrower must supply signature of program director certifying dates. If this program is not medical or educational, borrower must also provide statement from state licensing board showing that program is needed to become certified.

National Guard Duty Forbearance

As always it is easiest to copy what the qualifications are directly from the published criteria.  You may qualify for a National Guard Duty forbearance if you:

-Are a member of the National Guard and engaged in either:

-Active State duty under which a governor activated you based on state statute or policy, and the activities of the National Guard are paid for with state funds.

OR

-Full-time National Guard duty under which a governor was authorized, with the approval of the president or U.S. Secretary of Defense, to order you to state active duty, and the activities of the National Guard are paid for with federal funds.

-Do not qualify for a military service deferment or other deferment while you are on active military state duty.

-Were activated no more than six months after the last date you were enrolled in school at least half time.

The National Guard duty forbearance is granted for a maximum of twelve months at a time.  Please remember that if you wish to place your loans into forbearance that interest will accrue and may be added to the principal through capitalization.  This naturally can cause higher your balance and ultimately your payments can increase over time as a result.

Department of Defense Forbearance

As part of the military you may be eligible to have the Department of Defense pay for a portion or all of your student loans.  However the military only makes this payment annually.  Under normal circumstances this would cause the borrower to run up a significant delinquency.  To counteract this the Department of Defense Forbearance was created.  The DOD Forbearance is used to keep the account current while payment is awaited for from the DOD.

This forbearance must be applied for annually as it is only valid in 12 month increments.  However it is an unlimited forbearance.  The last section of the application must be filled out by a certified official (typically a commanding officer) in order to certify enrollment in the program.

 

Those who qualify for Teacher Loan Forgiveness qualify for either a $17,500 or $5,000 reward.  Now if you only have $10,000 in loans and qualify for $17,500 in forgiveness they are not going to make you make payments on something that could be completely forgiven at the end of the 5 years.  The caveat is that this is what your total would be at the end of the 5 years including interest.

So let us look at some examples:

-First the easy one.  Borrower has $25,000 in student loan debt.  Will not qualify regardless of what plan they apply for.

-Another easy one.  Borrower has a $4,500 dollar loan at 6.0% interest.  That is $270.00 a year in interest x 5 years=$1,350.00.  So at the end of the 5 years the borrower’s debt would be $5,850.  If they qualify for the $17,500 forgiveness they could use the forbearance.

-However same borrower qualifies for the $5,000 forgiveness.  They could not use the forbearance because at the end of 5 years there would not be enough to cover the total

-Same borrower, final example.  Borrower does not qualify year one but pays down balance to $4,000.00 after one year.  So the interest per year is now $240.00 and they only have 4 years left to qualify.  $240.00 x 4=$960.00.  This gives them a total of $4,960.00 so after the first year (and enough payments to get principal down to $4,000) borrower would qualify for forbearance.

As always if you think you qualify contact your servicer or download the form off the website.  This form also has many criteria tied to it so be sure and read everything you need to send in!

 

My favorite posts: Forbearances/Deferments