Student Loans

A deferment or forbearance could allow you to put off making payments on your loan if necessary.

The interest on a subsidized loan is usually paid by the government when a deferment is granted.

The interest on an unsubsidized loan may continue to add up (accrue) and become capitalized (added to the balance of your loan) at the end of the forbearance period.

Look at your loan documents to see whether you have an unsubsidized or subsidized loan. Oftentimes, borrowers have both.

Either way, you might qualify for a deferment if you are:

  • Enrolled in school half-time (6 units) in a graduate program
  • Enrolled full-time in a graduate fellowship program
  • Completing an internship (or specific courses/exams required for current employment)
  • Participating in a state’s rehabilitation program (a retraining program due to mild or severe disability)
  • Serving in the military
  • Receiving unemployment, food stamps or have a special circumstance
  • Other reasons

Step #1: Determine if you qualify

Look for the “Borrower’s Rights and Responsibilities Statement” or any other statement you have received from your lender for a list of programs. Start by reviewing ALL of the application forms and instructions (for each of the different programs). Then, read the fine print on each of the instructions. Highlight the program requirements and see if your situation is similar. Then, fill out the correct form completely, step-by-step. Be careful, you might be using the wrong form by mistake.

If you call your lender, don’t be discouraged by an opinion you receive over the phone. If the facts support your position that you qualify for a deferment (or forbearance, see below), then you will likely be granted the deferment (or be given a reason for denial). Talk with someone who understands your situation AND the organization’s protocols.

IF YOU DO NOT QUALIFY, consider the possibility of creating the conditions necessary to qualify (for example, go back to school, apply for food stamps, apply to the department of rehabilitation, etc.) and then fill out the forms. You might find that one of these other programs can help you even though what you really need is the deferment (or forbearance).

Step #2: Submit the correct application form by certified mail.

All information on the form needs to be correct and filled-out completely, otherwise the application will be rejected and/or mailed back to you.

To get approved, you also have to submit supporting documentation, such as a letter from an authorized official, agency or other person-in-charge. A person-in-charge could be someone you know who is willing to vouch for you and your situation by signing the form. Don’t stretch the truth but, at the same time, don’t be discouraged from applying.

After you fill-out the form, wait a day and take another look at it to be sure your application will be taken seriously. You can also ask someone you trust (a legal professional) to take a look at the form. Make photocopies of all forms for yourself but be sure to send the original.

You could speed up the process by first sending the application form and documentation by fax to a specific person or department (and then send it by certified mail).

You should not be in default on a student loan before applying for deferment. Your rationale should be well-documented and you should send the form to the correct person or department. You could also follow up by phone to make sure your application has been received.

Mail the form and documentation from the post office in a letter that is “certified with return receipt”. Certified shows the date you sent the document, return receipt means they send you a post card with the recipient’s signature. The post office charges about $6 for this service.

A forbearance is used instead of a deferment to postpone payments and, unfortunately, the interest will continue to add up (accrue) and become capitalized (added to the balance of your loan) at the end of the forbearance period, usually. A forbearance can be approved even if your loans are in default.

You might qualify for a forbearance if you have:

  • Illness
  • Financial Hardship
  • An Internship Position (usually medical or dental)
  • Other reasons

You might not be able to obtain a forbearance if you are in default.

Oftentimes borrowers have both subsidized and unsubsidized loans. By taking the deferment or forbearance, your loans won’t be paid off any time soon.

However, you might be able to make payments while your loans are in deferment, in which case you could specify that the payment be applied to the unsubsidized loan. Outline your request in a letter and send it the mail (with the payment) (certified with return receipt) instead of electronically. An electronic payment probably won’t get the human touch required to reduce the balance of a specific unsubsidized loan.

You can also pay the interest only while your unsubsidized loans are deferred. That way, the balance won’t keep going up.

New borrowers will loose the subsidy associated with subsidized federal student loans if they do not graduate within 150% of the time normally required for their degree program. This rule applies to loans taken out on or after July 1, 2013.