Deferment and Forbearance
There are several programs designed to lower your monthly student loan payments. Managing multiple loans can be overwhelming, but you may be able to combine all of your student loans into one loan, with one monthly payment. Income-Based Repayment (IBR) is a plan that caps your required monthly payments on the major types of federal student loans at an amount intended to be affordable based on income and family size. All Stafford, PLUS, and Consolidation Loans made under either the Direct Loan or Federal Family Education Loan programs are eligible to be included in the program
Events like losing a job, getting sick, and having financial trouble can create many challenges. In such situations, making on-time student loan payments may not be a priority.
Before missing any payments, though, know that under certain circumstances you can temporarily suspend your payments with deferment and forbearance. Find out about the important differences between these postponement options—and find the option right for you.
- Different deferments have different criteria.
- Unemployment, extreme economic hardship, enrolling in school at least half time, or active military duty may qualify you.
- If you meet the criteria and have deferment time available, you cannot be denied a deferment.
- During a deferment, the federal government pays any interest that accrues on your subsidized loans—but not on unsubsidized loans. Unsubsidized interest on deferred loans can increase the amount you owe overall.
- If you do not meet the criteria for a deferment, you may qualify for forbearance.
- In most cases, forbearance is granted solely at the discretion of your lender or servicer.
- Forbearances are usually reserved for cases of financial hardship or illness.
- Unlike a deferment, in forbearance both subsidized and unsubsidized portions of your loan continue to accrue interest.
- At the end of the forbearance period, the interest is capitalized (added to the principal balance of the loan).
- Forbearance increases the amount you owe.
How ISR Works
The ISR Plan structures loan payments based on the borrower’s annual income. The payments will increase or decrease based on changes to income reported annually. ISR payments are structured for a term of 10 years. To obtain more information about ISR Repayment Plan, borrowers should contact:
- Loan Servicer- for FFEL Program loans owned by the U.S. Department of Education
- Lender- for FFEL Program loans not owned by the U.S. Department of Education.
Choosing the Right Option
Deferment and forbearance are both preferable to missing loan payments. However, because forbearance increases the amount you owe, try to first qualify for a deferment.
Also, before postponing repayment, see if it makes sense for you to lower your payments with a different repayment schedule. This can save you money and preserve your deferment and forbearance eligibility for situations when you really need it. There are limits to how much deferment and forbearance time you can use.
Under certain circumstances, borrowers may receive a deferment or forbearance that temporarily postpones or reduces student loan payments. Postponing or reducing payments may help a borrower avoid defaulting on a student loan. Borrowers must work with their loan servicer to apply for deferment or forbearance.