Sometimes, for whatever the situation, it is impossible to make your student loan payment. However, student loan borrowers have options to postpone your payments and bring your account current. Remember, whatever option you decide, you should always explore and know these options before the situation is beyond reparable. In this part of our Student Loan Blog series, Orange County bankruptcy attorneys will focus on Deferment options at your disposal in tough financial times. Part 5 will discuss forbearance and Part 6 will discuss cancellation of the student loan.
Deferment of Student Loans
If you are experiencing financial hardship, going back to school, are unemployed, or on active duty military service, postponing payments with deferment can help you stay current on your student loans. With subsidized Stafford and subsidized consolidation loans, interest will not accrue during the deferment period. On the other hand, keep in mind that for unsubsidized Stafford loans, PLUS loans, SLS loans, or unsubsidized consolidation loans, interest will continue to accrue during the deferment period. Therefore we recommend to pay the interest during the deferment. This will prevent the addition of interest to the balance of your loan.
Available Deferments
Below are different types of deferments that the federal government allows. We will explain each situation to determine whether they apply to you.
Armed Forces
This deferment is for borrowers who serve on active military duty in the Armed Forces or National Guard.
This deferment applies to Stafford or SLS loans disbursed
To qualify for this deferment, your first Stafford or SLS loan must have been disbursed before July 1, 1993, or for parent borrowers, your PLUS loan must have been disbursed before August 15, 1983. You must be serving on active duty in the U.S. Armed Forces during a war, military operation, or national emergency. This also applies to members of the reserve component of the Armed Forces or the National Guard in a full-time capacity for a period of at least one year or due to a national mobilization.
Domestic Volunteer Deferment
Like the Armed Forces Deferment, your Stafford or SLS loan must have been disbursed before July 1, 1993, or for parent borrowers, your PLUS loan must have been disbursed before August 15, 1983. You must be a full-time, paid volunteer in an ACTION (Domestic Volunteer Service Act of 1973, VISTA, or AmeriCorps) program and serving for a period of at least one year. The cumulative maximum deferment time limit is also 36 months.
Economic Hardship Deferment
To qualify for this deferment, your first loan must have been disbursed on or after July 1, 1993, and you must receive public assistance, serve in the Peace Corps, or make less than the minimum wage or poverty guideline.
Additionally, if you have FFELP, Direct, and/or Perkins loans and you have were granted an economic hardship deferment on one of your other federal loans, you may receive this deferment on other federal loans by showing the loan holder documentation of your granted hardship deferment. Again, 36 months is the maximum deferment period.
Full-Time Teacher in a Teacher Shortage Area
If you teach in a designated teacher shortage area, you may qualify for this deferment. The maximum deferment period is 36 months. To qualify for this deferment, your first Stafford or SLS loan must have been disbursed before July 1, 1993. PLUS loans do not qualify. The Chief School Administrator or the Chief State School Office determines a designated teacher shortage.
Graduate Fellowship
If you are in a full time graduate fellowship program, you may qualify for this deferment. The maximum time for this deferment is unlimited.
Internship/Residency Deferment
To qualify for this deferment, your first Stafford or SLS loan must be disbursed before July 1, 1993, or for parent borrowers, your PLUS loan must have been disbursed before August 15, 1983. Consolidation loans do not qualify for this deferment. Additionally, you must be accepted into either an internship/residency program that leads to a degree or certificate from an institution of higher education, hospital, or health care facility that offers post-graduate training or an internship/residency program that is required before you can begin professional practice or service. The maximum time limit is 24 cumulative months for this deferment.
Military
This deferment is offered for student loan borrowers serving in the military on active duty or in the National Guard on qualifying duty during a war or other military operation, or during a national emergency. The qualifying period must begin on or after October 1, 2007, or include that date. There is no cumulative maximum time limit for this deferment.
National Oceanic and Atmospheric Administration (NOAA) Deferment
To qualify for this deferment, you must receive your first Stafford or SLS loan disbursement before July 1, 1993. PLUS and consolidation loans do not qualify. You must be on active duty with the NOAA. The maximum time limit is 36 cumulative months for this deferment, inclusive of any Public Health Services and Armed Forces deferment time used.
Parental Leave
You must receive your first Stafford or SLS loan disbursement before July 1, 1993 to qualify for this deferment. PLUS loans do not qualify. You can request this deferment if you are pregnant or caring for a newborn or newly adopted child. Additionally, you must enroll in and attend school at least half-time in the preceding six months. Moreover, you cannot be presently attending school or working. The mother or qualify for this deferment. The maximum time period for each occurrence is six months.
Peace Corps Volunteer
To qualify for this deferment, you must receive your first Stafford or SLS loan disbursement before July 1, 1993, or for parent borrowers, you must receive your PLUS loan disbursement before August 15, 1983. Consolidation loans do not qualify for this deferment. You must be serving for a period of at least one year as a full-time volunteer in the Peace Corps. The cumulative maximum time limit for this deferment is 36 months. Additionally, if you are in the Peace Corps you might also qualify for a hardship deferment.
Post-Active Duty Student
This deferment is available to borrowers who are members of the Armed Forces Reserve or National Guard (including retired members) who are on active duty while still enrolled or within six months after being enrolled in school on a half-time basis or more. The service period must begin on or after October 1, 2007, or include that date. The maximum time period for each occurrence is 13 months.
Post-Enrollment Deferment
A parent borrower or a graduate or professional student who obtained a PLUS loan on or after July 1, 2008 may deferred payments for a six months following the date the student ceases to be enrolled on at least a half-time basis.
Public Health Services
To qualify for this deferment, you must be currently serving as an officer in the Commissioned Corps of the Public Health Service. Additionally, you must receive your Stafford or SLS loan disbursement before July 1, 1993, or for parent borrowers, you must receive your PLUS loan disbursement before August 15, 1983. Consolidation loans do not qualify for this deferment. The cumulative maximum time limit for this deferment is 36 months, inclusive of any Armed Forces and NOAA deferment time used.
Rehabilitation Training
When studding in a rehabilitation training program, you can defer your student loans. Principal and interest do not accrue during the period of rehabilitation training deferment. While in rehabilitation you may defer your loans for up to a maximum of three years. To determine if your loan type is eligible, please refer to the student loan eligibility guide.
To qualify for a rehabilitation training deferment, you must be receiving, or be scheduled to receive, services under a program that is licensed, approved, certified, or otherwise recognized by one of the following entities as providing rehabilitation training to disabled individuals by a State agency with responsibility for:
- vocational rehabilitation programs;
- drug abuse treatment programs;
- mental health services programs;
- alcohol abuse treatment programs; or
- The Department of Veterans Affairs.
You must pay your loan at the start of the deferment period to qualify for the Rehabilitation Training deferment. Following a Rehabilitation Training deferment, you will receive an additional six-month grace period. Principal and interest will not accrue during the post-deferment grace period.
School Deferment
In school deferment allows you to temporarily suspend payments on your student loans while you are in school. Enrolling at least half time in an eligible institution will trigger your “in school”. To begin an in school deferment, you must submit a request through your lender. To qualify for an in school deferment you submit a form to your lender. You must enroll in an eligible institution and attend at least half-time. Your deferment will last as long as you meet the requirements. Once you fall below half time enrollment (or reach your expected graduation date) your deferment should end.
Tax-Exempt Volunteer
Tax-Exempt Organization Volunteer Deferment — A deferment for borrowers who serve as full-time, paid volunteers for a tax-exempt organization.
The maximum cumulative time frame that you may receive this deferment is 36 months. You must have an authorized official of the volunteer program certify your dates of service.
To qualify, you must receive your Stafford or SLS loan disbursement before July 1, 1993, or you are a PLUS loan borrower and you make your first loan before August 15, 1983. Additionally, you must serve full time in an organization that has a tax exemption under Section 501(c)(3) of the Internal Revenue Code of 1986. You are assisting low-income people and their communities in eliminating poverty and poverty-related human, social, and environmental conditions and do not earn more than the federal minimum wage. You also must not engage in religious activities as part of your duties and agree to serve for a period of at least one year.
Temporary Total Disability
This deferment is available to borrowers whose first loan was disbursed prior to July 1, 1993. You must be temporarily totally disabled, which means you are unable to work and earn money or attend school for a period of at least 60 days because of an injury or illness. You are also eligible for this deferment if you are unable to work because of continuously caring over a period of at least 90 days for a dependent or spouse who is temporarily totally disabled due to an injury or illness. The cumulative maximum time limit for this deferment is 36 months.
Unemployment
Postponement of your loan is available if you are seeking, but are unable to secure full-time employment. This is an option if you cannot secure least 30 hours per week and you expect it to last at least 3 months. You would need to provide proof of unemployment compensation benefits or proof of your registration with an unemployment agency. You are not eligible if you refuse to consider positions, salaries, or responsibility levels that you deem you are over qualified for due to education or experience. This deferment is available for up to three years.
Working Mother
To qualify for this deferment, you must receive the disbursement for your first Stafford or SLS loan before July 1, 1993. PLUS loans do not qualify. You must be a mother of a preschool-age child, entering or re-entering the workforce, employed full-time, and earning a wage that is no more than $1 per hour over the minimum wage rate. The cumulative maximum time limit for this deferment is 12 months.
Bankruptcy
Bankruptcy is also an option to postpone your payments. If you file for a Chapter 7, in most cases, the student loan provider will not collect while you are in bankruptcy which can take up to six months or even longer. We will discuss the bankruptcy option in further detail in Part VIII of this series.
In addition to managing your student loan debt, you should also consider reading our blog series on credit debt. Together, you can manage all of your debts into something more manageable.