Consolidate and Postpone Payments

Deferment

A deferment is a postponement of principal and interest payments for an agreed upon period of time. The federal government will pay the interest for subsidized loans during periods of deferment. Some of the available deferments include in-school, unemployment, economic hardship and military.

Deferments are an entitlement if you qualify. Some deferments are unlimited while others have length restrictions. Interest continues to accrue on unsubsidized loans during periods of deferment. Unpaid accrued interest will capitalize (be added to your principal balance) at the end of a deferment. Time spent on a deferment may not count toward Public Service Loan Forgiveness or income-driven repayment forgiveness. Therefore, some deferments may not be as beneficial depending on your circumstances.

Deferment Type Time Limit
In School Deferment During a period of at least half-time enrollment in college or career school
Unemployment Deferment During a period of unemployment or inability to find full-time employment (for up to 3 years)
Economic Hardship Deferment During a period of economic hardship, including Peace Corps service (for up to 3 years)
Military Deferment

During a period of active duty military service during a war, military operation, or national emergency

During the 13 months following the conclusion of qualifying active duty military service, or until you return to enrollment on at least a half-time basis, whichever is earlier, if you are a member of the National Guard or other reserve component of the U.S. armed forces and you were called or ordered to active duty while enrolled at least half-time at an eligible school or within six months of having been enrolled at least half-time

Forbearance

General Forbearance is a temporary postponement of principal and interest payments for an agreed upon period of time. Because interest on both subsidized and unsubsidized loans continues to accrue, a forbearance may increase the total amount you owe on your own student loans and increase the amount of time your loan is in repayment. This should be used only as a short-term solution and option of last resort. In most cases of financial hardship, finding a more manageable payment amount with a different repayment plan is the best option.

During a forbearance, daily interest will continue to accrue on your account at a rate of (principle balance X interest rate ÷ 365 days). This interest remains your responsibility and will capitalize if not paid (be added to your principal balance). You may choose to make interest-only payments during this time to avoid or reduce the amount of capitalized interest. This will help you pay less in interest over the life of the loan, maintain your monthly payment amount and pay down your debt faster.

Mandatory Forbearances

Mandatory forbearances will be granted to you based on eligibility for the following reasons:

Mandatory Forbearance Type Time Limit
Medical or Dental Internship or Residency Forbearance During a period when you are serving in a medical or dental internship or residency program, and you meet specific requirements.
Student Loan Debt Burden Forbearance When the total amount you owe each month for all the student loans you received is 20 percent or more of your total monthly gross income (for up to 3 years and additional conditions apply).
National Service Forbearance During a period when you are serving in a national service position for which you received a national service award.
Teacher Loan Forgiveness Forbearance During a period when you are performing teaching service that would qualify for teacher loan forgiveness.
Department of Defense Loan Repayment Program Forbearance During a period when you qualify for partial repayment of your loans under the U.S. Department of Defense Student Loan Repayment Program.
National Guard Forbearance During a period when you are a member of the National Guard and have been activated by a governor, but you are not eligible for a military deferment.
Natural Disaster Forbearance During a federally-declared natural disaster where you live (for up to three months)

Loan Debt Burden Forbearance

If the monthly payment due on your federal loans is equal to or greater than 20% of your total monthly income, you may request to temporarily postpone payments or make smaller payments using a Loan Debt Burden Forbearance. This forbearance may be granted for up to 12 months at a time, for a maximum of three years. You must provide your loan servicer with proof of your total monthly income in order to apply for this forbearance.

Processing Forbearance

Your federal loan servicer may apply a processing forbearance to cover the following circumstances: during various transition periods, such as during a period in which the lender is collecting and processing documentation relating to a borrower’s deferment, forbearance, change in repayment plan or application for a consolidation loan. Interest that accrues during this type of forbearance will not capitalize.

Loan Consolidation

A Direct Consolidation Loan allows you to combine multiple FFELP and Direct student loans into one loan. The result is a single monthly payment with one interest rate (weighted interest rate average rounded up). Carefully consider if this is the best option for you before you apply for consolidation.