deferments and forbearances

After you graduate from college and enter your student loan repayment period, you may encounter special circumstances that make it difficult for you to pay back your loans. If this situation arises, then you can request a deferment or forbearance that will adjust or delay your loan payments.

Deferments
A deferment allows you to temporarily postpone payments on your loan. If you have a Federal Subsidized Stafford Loan or a Federal Perkins Loan, the government will pay the interest on your loan during the deferment period. If you have a Federal Unsubsidized Stafford Loan, you will be responsible for the interest on the loan during the deferment. If you don't pay the interest as it accrues, it will be capitalized. Also, parents are responsible for paying interest on Federal PLUS Loans while in deferment. Deferments can be granted for various reasons, but they usually include:

• Unemployment
• Economic hardship
• Student enrollment
• Graduate fellowships
• Rehabilitation training

Deferments are entitlements; if you qualify and submit a complete and timely request, your loan servicer is required to grant the deferment to you. If you apply for a deferment, you must continue to make full monthly payments until the deferment request is approved by the loan servicer. While you are in deferment, your loan will be reported to the credit bureaus as current. Keep in mind that deferments have time limits. You will be expected to resume full payments once a deferment ends.

Forbearances
If you do not qualify for a deferment, you may request forbearance. Under forbearance, you can agree to either make reduced payments or no payments at all for a limited period. During forbearance, you remain responsible for the interest accruing on your account, even if your loans were subsidized while you were in school. If you don't pay the interest as it accrues, it will be capitalized.

There are two types of forbearances: discretionary and mandatory. For discretionary forbearances, your loan servicer chooses if and when you can get one. You can request a discretionary forbearance for:

• Financial hardship
• Illness

For mandatory forbearances, if you meet the eligibility criteria for the forbearance, your loan servicer is required to grant the forbearance. You can request a mandatory forbearance if:

• Your federal student loan debt exceeds 20% of your gross income.
• You are serving in a medical or dental internship or residency.
• 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 deferement.

If you apply for forbearance, you must continue to make full monthly payments until the forbearance request is approved by the loan servicer. Forbearance will not eliminate any prior derogatory credit history.

If you are having difficulty making payments on your student loan, contact your loan servicer. Your loan holder needs to be aware of your specific situation so they can give you the appropriate information and help you avoid default. If you are in default on your loan, you are not eligible for a deferment or forbearance.