Student Loan Deferments and Forbearance

The scariest thing about keeping up with your student loan payments — or with any recurring bill — is the thought of one day losing your job or getting a reduction in pay such that you can no longer afford your loan payments. This is one area where student loans are better than credit card debt, car loans, and mortgages, because there is a built-in program for missing payments when you're laid off or face other economic emergencies: deferments and forbearance. Using a deferment or forbearance will allow you time to get your situation straightened out by giving you a temporary reprieve from your student loan payments.

Deferments

Deferments are always preferred because the government pays the interest on your subsidized student loans for you during a deferment. Since the government has to shell out the money to pay your interest, you normally will have to show proof to your lender of your qualifying deferment situation, such as for active-duty military.

Most of us used an in-school deferment — an unlimited deferment — while we attended college with at least a part-time status. If we didn't — and we didn't make payments — we probably would have defaulted before graduation.

Economic deferments require proof of your income to show that you meet the current standards for this deferment type. Economic deferments are limited to three years. The Federal Student Aid Web site offers a current list of situations and qualifications for deferment.

Forbearance

Certain types of forbearance, such as temporary hardship forbearance, are much easier to get than deferments. You're generally approved for this forbearance type one year at a time, although you can choose not to take the reprieve for the full year. The total amount of this type of forbearance is normally three years.

Temporary hardship forbearance is for when you need a temporary reprieve from making payments. You won't necessarily be asked to prove your economic problem, but your interest will still accrue, as with all forbearance.

You shouldn't use up all your forbearance time at once. However, you can use this time if you need to pay off a credit card or if you had unpaid sick days, and without the reprieve you'd have to miss a mortgage payment to pay your student loan bill. Taking three to six months to get the rest of your financial life in order is not a bad thing. But you must stay focused, or you'll use up your forbearance without anything positive to show for it.

Don't get confused if you hear "general forbearance" instead of "temporary hardship forbearance." Each servicer could call it something slightly different, but as long as you mention that you're looking for deferment or forbearance when calling your loan office, the representative will guide you toward the best option.