Deferments and Forbearance: Tools to Help with Student Loan Repayment

Tom Kokis
Director of Berkeley College Student Financial Literacy Group

In these uncertain and difficult economic times, many individuals may find themselves having problems making payments on their student loans. It is important not to fall behind on this important obligation as it can have very serious consequences for a borrower’s credit rating and ability to secure other forms of credit.



Fortunately, the federal student loan programs come with helpful tools that can assist borrowers through these difficult times. Students can turn to a deferment or forbearance to assist them to manage their student loan obligation.

A deferment allows a student loan borrower to postpone payment on their federal loans for specified reasons. The federal government allows borrowers to receive a deferment on their loans when:

• A borrower is a matriculated student enrolled at least half time in a degree or certificate program. This deferment can last for as long as the student is enrolled at least half time.
  
• A borrower is unemployed. A borrower may apply for an unemployment deferment and defer payment on their loan for up to three years. The borrower must be actively seeking full time employment in the United States and provide proof of receiving unemployment benefits.
  
• A borrower is under “economic hardship”. To qualify for an economic hardship deferment, a borrower must either be receiving public assistance, serving in the Peace Corps or working full time, but earning less than the federal minimum wage or 1.5 times the poverty level for the number of members in your family.
  
• A borrower is serving in the military and on active duty during a war, military operation or some other national emergency.

For borrowers who do not qualify for any of these deferments, but still need repayment relief, forbearance may be an option. Forbearance allows a borrower to postpone payments in situations where borrowers are experiencing financial hardship. Examples of financial hardship include unanticipated medical expenses or loss of wages of a spouse. Forbearance can be granted up to one year for each request.

Borrowers must contact their student loan lender or servicer to initiate the process of a deferment or forbearance request. Your lenders and servicers are ready to help and guide you through the process. For many, the request can be done over the phone and on line via a secure web site. Berkeley alumni should also feel free to email the Berkeley College Student Financial Literacy Group for more information at studentfinancialliteracy@berkeleycollege.edu. We are here to help you and answer any questions that you may have.