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Deferment: Student Loan Blog Series IV

Deferment - Bankruptcy AttorneysSometimes, for whatever the situation, it is impossible to make your student loan payment. However, student loan borrowers have options to postpone your payments and bring your account current. Remember, whatever option you decide, you should always explore and know these options before the situation is beyond reparable. In this part of our Student Loan Blog series, Orange County bankruptcy attorneys will focus on Deferment options at your disposal in tough financial times. Part 5 will discuss forbearance and Part 6 will discuss cancellation of the student loan.

Deferment of Student Loans

If you are experiencing financial hardship, going back to school, are unemployed, or on active duty military service, postponing payments with deferment can help you stay current on your student loans. With subsidized Stafford and subsidized consolidation loans, interest will not accrue during the deferment period. On the other hand, keep in mind that for unsubsidized Stafford loans, PLUS loans, SLS loans, or unsubsidized consolidation loans, interest will continue to accrue during the deferment period.  Therefore we recommend to pay the interest during the deferment. This will prevent your interest from being added to the balance of your loan.

Available Deferments

Below are different types of deferments allowed by the federal government. We will explain each situation to determine whether they apply to you.

Armed Forces

This deferment is for borrowers who serve on active military duty in the Armed Forces or National Guard.

This deferment applies to Stafford or SLS loans disbursed

To qualify for this deferment, your first Stafford or SLS loan must have been disbursed before July 1, 1993, or for parent borrowers, your PLUS loan must have been disbursed before August 15, 1983. You must be serving on active duty in the U.S. Armed Forces during a war, military operation, or national emergency. This also applies to members of the reserve component of the Armed Forces or the National Guard in a full-time capacity for a period of at least one year or due to a national mobilization.

Domestic Volunteer Deferment

Like the Armed Forces Deferment, your Stafford or SLS loan must have been disbursed before July 1, 1993, or for parent borrowers, your PLUS loan must have been disbursed before August 15, 1983. You must be a full-time, paid volunteer in an ACTION (Domestic Volunteer Service Act of 1973, VISTA, or AmeriCorps) program and serving for a period of at least one year. The cumulative maximum deferment time limit is also 36 months.

Economic Hardship Deferment

To qualify for this deferment, your first loan must have been disbursed on or after July 1, 1993, and you must receive public assistance, serve in the Peace Corps, or make less than the minimum wage or poverty guideline.

Additionally, if you have FFELP, Direct, and/or Perkins loans and you have were granted an economic hardship deferment on one of your other federal loans, you may receive this deferment on other federal loans by showing the loan holder documentation of your granted hardship deferment. Again, 36 months is the maximum deferment period.

Full-Time Teacher in a Teacher Shortage Area

If you teach in a designated teacher shortage area, you may qualify for this deferment. The maximum deferment period is 36 months. To qualify for this deferment, your first Stafford or SLS loan must have been disbursed before July 1, 1993. PLUS loans do not qualify. A designated teacher shortage area is determined by the Chief School Administrator or the Chief State School Office.

Graduate Fellowship

If you are in a full time graduate fellowship program, you may qualify for this deferment. The maximum time for this deferment is unlimited.

Internship/Residency Deferment

To qualify for this deferment, your first Stafford or SLS loan must be disbursed before July 1, 1993, or for parent borrowers, your PLUS loan must have been disbursed before August 15, 1983. Consolidation loans do not qualify for this deferment. Additionally, you must be accepted into either an internship/residency program that leads to a degree or certificate from an institution of higher education, hospital, or health care facility that offers post-graduate training or an internship/residency program that is required before you can begin professional practice or service. The maximum time limit is 24 cumulative months for this deferment.

Military

This deferment is offered for student loan borrowers serving in the military on active duty or in the National Guard on qualifying duty during a war or other military operation, or during a national emergency. The qualifying period must begin on or after October 1, 2007, or include that date. There is no cumulative maximum time limit for this deferment.

National Oceanic and Atmospheric Administration (NOAA) Deferment

To qualify for this deferment, your first Stafford or SLS loan must have been disbursed before July 1, 1993. PLUS and consolidation loans do not qualify. You must be on active duty with the NOAA. The maximum time limit is 36 cumulative months for this deferment, inclusive of any Public Health Services and Armed Forces deferment time used.

Parental Leave

To qualify for this deferment, your first Stafford or SLS loan must have been disbursed before July 1, 1993. PLUS loans do not qualify. You can request this deferment if you are pregnant or caring for a newborn or newly adopted child. Additionally, you must have been enrolled in school at least half-time in the preceding six months. Moreover, you cannot be presently attending school or working.  The mother or qualify for this deferment. The maximum time period for each occurrence is six months.

Peace Corps Volunteer

To qualify for this deferment, your first Stafford or SLS loan must have been disbursed before July 1, 1993, or for parent borrowers, your PLUS loan must have been disbursed before August 15, 1983. Consolidation loans do not qualify for this deferment. You must be serving for a period of at least one year as a full-time volunteer in the Peace Corps. The cumulative maximum time limit for this deferment is 36 months. Additionally, if you are in the Peace Corps you might also qualify for a hardship deferment.

Post-Active Duty Student

This deferment is available to borrowers who are members of the Armed Forces Reserve or National Guard (including retired members) who are on active duty while still enrolled or within six months after being enrolled in school on a half-time basis or more. The service period must begin on or after October 1, 2007, or include that date. The maximum time period for each occurrence is 13 months.

Post-Enrollment Deferment

A parent borrower or a graduate or professional student who obtained a PLUS loan on or after July 1, 2008 may deferred payments for a six months following the date the student ceases to be enrolled on at least a half-time basis.

Public Health Services

To qualify for this deferment, you must be currently serving as an officer in the Commissioned Corps of the Public Health Service.  Additionally, your first Stafford or SLS loan must have been disbursed before July 1, 1993, or for parent borrowers, your PLUS loan must have been disbursed before August 15, 1983. Consolidation loans do not qualify for this deferment. The cumulative maximum time limit for this deferment is 36 months, inclusive of any Armed Forces and NOAA deferment time used.

Rehabilitation Training

Student loans may be deferred when studying in a rehabilitation training program. Principal and interest do not accrue during the period of rehabilitation training deferment. Loans may be deferred for the period of rehabilitation study up to a maximum of three years. To determine if your loan type is eligible, please refer to the student loan eligibility guide.

To qualify for a rehabilitation training deferment, you must be receiving, or be scheduled to receive, services under a program that is licensed, approved, certified, or otherwise recognized by one of the following entities as providing rehabilitation training to disabled individuals:

A State agency with responsibility for vocational rehabilitation programs;

A State agency with responsibility for drug abuse treatment programs;

A State agency with responsibility for mental health services programs;

A State agency with responsibility for alcohol abuse treatment programs; or

The Department of Veterans Affairs.

Additionally, to qualify for an Rehabilitation Training deferment, your loan account must be paid to the start of the deferment period.

Following a Rehabilitation Training deferment, you will receive an additional six-month grace period. Principal and interest will not accrue during the post-deferment grace period.

School Deferment

In school deferment allows you to temporarily suspend payments on your student loans while you are in school. Your “in school” status is triggered by enrolling at least half time in an eligible institution. To begin an in school deferment, you must submit a request through your lender. To qualify for an in school deferment you submit a form to your lender. You must be enrolled in an eligible institution and attend at least half-time. Your deferment will last as long as you meet the requirements. Once you fall below half time enrollment (or reach your expected graduation date) your deferment should end.

Tax-Exempt Volunteer

Tax-Exempt Organization Volunteer Deferment — A deferment for borrowers who serve as full-time, paid volunteers for a tax-exempt organization.

The maximum cumulative time frame that you may receive this deferment is 36 months. You must have an authorized official of the volunteer program certify your dates of service.

To qualify your Stafford or SLS loan must have been made before July 1, 1993, or you are a PLUS loan borrower and your first loan was made before August 15, 1983. Additionally, you must serve full time in an organization that has a tax exemption under Section 501(c)(3) of the Internal Revenue Code of 1986. You are assisting low-income people and their communities in eliminating poverty and poverty-related human, social, and environmental conditions and do not earn more than the federal minimum wage. You also must not engage in religious activities as part of your duties and agree to serve for a period of at least one year.

Temporary Total Disability

This deferment is available to borrowers whose first loan was disbursed prior to July 1, 1993. You must be temporarily totally disabled, which means you are unable to work and earn money or attend school for a period of at least 60 days because of an injury or illness. You are also eligible for this deferment if you are unable to work because of continuously caring over a period of at least 90 days for a dependent or spouse who is temporarily totally disabled due to an injury or illness. The cumulative maximum time limit for this deferment is 36 months.

Unemployment

Postponement available if you are seeking but are unable to secure full-time employment – at least 30 hours per week that is expected to last at least three months.  You would need to provide proof of unemployment compensation benefits or proof of your registration with an unemployment agency.  You are not eligible if you refuse to consider positions, salaries, or responsibility levels that you deem you are over qualified for due to education or experience. This deferment is available for up to three years.

Working Mother

To qualify for this deferment, your first Stafford or SLS loan must have been disbursed before July 1, 1993. PLUS loans do not qualify. You must be a mother of a preschool-age child, entering or re-entering the workforce, employed full-time, and earning a wage that is no more than $1 per hour over the minimum wage rate. The cumulative maximum time limit for this deferment is 12 months.

Bankruptcy

Bankruptcy is also an option to postpone your payments. If you file for a Chapter 7, in most cases, the student loan provider will not collect while you are in bankruptcy which can take up to six months or even longer.  We will discuss the bankruptcy option in further detail in Part VIII of this series.

In addition to managing your student loan debt, you should also consider reading our blog series on credit debt.  Together, you can manage all of your debts into something more manageable.

Student Loan Blog Series: Introduction

Student Loan Blog Series I: The Crisis

Student Loan Blog Series II: Types of Loans

Student Loan Blog Series III: Repayment Options

Student Loan Blog Series V: Forbearance

Student Loan Blog Series VI: Cancellation

Student Loan Blog Series VII: Default Options

Student Loan Blog Series VIII: Bankruptcy