Deferment, forbearance, cancellation
Three important facets of student loan repayment are deferments, forbearances and cancellations. Each is explained below.
One thing to keep in mind is that private loans generally provide fewer deferment, forbearance and cancellation options than federal loans do. If you are thinking about taking out a private loan, you should find out what options the various lenders you’re considering offer.
A deferment lets you temporarily postpone payment. Interest may not accrue during a deferment if the loan is a subsidized Federal Direct Loan.
You may qualify for a federal student loan deferment while you are:
- Enrolled at least half time in an eligible postsecondary school or studying full time in a graduate fellowship program or an approved disability rehabilitation program
- Unemployed or meet the rules for economic hardship (limited to three years)
You may be eligible for a deferment based on service in the Armed Forces or National Guard. Refer to your Master Promissory Note or contact your servicer for more information about a deferment based on military service.
In most cases, you must request a deferment and document your eligibility.
If you’ve gone back to school and your servicer receives enrollment information that shows you’re enrolled at least half time, it should automatically put your loans into deferment and notify you. You can cancel the deferment and continue to make payments.
If you can’t make your payments but don’t qualify for a federal loan deferment, you may be eligible for a forbearance. Forbearance lets you temporarily stop making payments on your loan, temporarily make smaller payments or extend the time for making payments. Some common forbearances include illness, financial hardship or serving in a medical or dental internship or residency.
Under certain circumstances, your servicer can automatically grant you a forbearance — for instance, while processing a deferment, forbearance, cancellation, change in repayment plan or consolidation, or if you are mobilized for active duty or a local or national emergency.
Under certain circumstances, all or part of your federal student loans may be canceled or discharged.
If you teach full-time in an elementary or secondary school in a low-income area for five consecutive years, you may qualify to have up to $17,500 in federal student loans forgiven. You may have to pay taxes on the amount that is forgiven. This does not apply to Federal PLUS Loans. For more information, contact your servicer.
If you work in certain public service jobs and made 120 full, on-time payments on your Direct Loans after October 1, 2007, the remaining balance may be forgiven. Only payments made under certain repayment plans count toward the required 120 payments. You must not be in default on the loans that are forgiven. You may have to pay taxes on the amount that is forgiven.
You may be able to have all or a part of your federal student loan canceled if:
- Your school closed before you completed your program
- Your school falsely certified you were eligible for a loan
- Your loan was falsely certified because of identity theft (additional requirements apply)
- You withdrew from school, but the school didn’t pay a refund it owed under its written policy or federal regulations. Check with the school to see how refund policies apply to federal aid.
Your federal student loan may be discharged if you’re totally and permanently disabled and you meet certain requirements during a three-year conditional discharge period. You must provide a physician’s statement that you became totally and permanently disabled after the loan was made.
Your loan may be canceled if it is discharged in bankruptcy if you can prove to the court that repaying the loan would cause undue hardship. Few student loans are discharged in bankruptcy.
If you die, your loan will be canceled if a family member or other representative provides an original, a copy of the original or a certified copy of your death certificate to your servicer.