For the past seven years, Kat has been helping people make the best financial decisions for their unique situations, whether they're looking for the right insurance policies or trying to pay down debt. Kat has expertise in insurance and student loans.
Kat Tretina Personal Finance WriterFor the past seven years, Kat has been helping people make the best financial decisions for their unique situations, whether they're looking for the right insurance policies or trying to pay down debt. Kat has expertise in insurance and student loans.
Written By Kat Tretina Personal Finance WriterFor the past seven years, Kat has been helping people make the best financial decisions for their unique situations, whether they're looking for the right insurance policies or trying to pay down debt. Kat has expertise in insurance and student loans.
Kat Tretina Personal Finance WriterFor the past seven years, Kat has been helping people make the best financial decisions for their unique situations, whether they're looking for the right insurance policies or trying to pay down debt. Kat has expertise in insurance and student loans.
Personal Finance Writer Rachel Witkowski Correspondent/EditorRachel Witkowski is an award-winning journalist whose 20-year career spans a wide range of topics in finance, government regulation and congressional reporting. Ms. Witkowski has spent the last decade in Washington, D.C., reporting for publications i.
Rachel Witkowski Correspondent/EditorRachel Witkowski is an award-winning journalist whose 20-year career spans a wide range of topics in finance, government regulation and congressional reporting. Ms. Witkowski has spent the last decade in Washington, D.C., reporting for publications i.
Written By Rachel Witkowski Correspondent/EditorRachel Witkowski is an award-winning journalist whose 20-year career spans a wide range of topics in finance, government regulation and congressional reporting. Ms. Witkowski has spent the last decade in Washington, D.C., reporting for publications i.
Rachel Witkowski Correspondent/EditorRachel Witkowski is an award-winning journalist whose 20-year career spans a wide range of topics in finance, government regulation and congressional reporting. Ms. Witkowski has spent the last decade in Washington, D.C., reporting for publications i.
Correspondent/EditorUpdated: Mar 20, 2024, 1:50pm
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If you cannot afford your federal student loan payments, you may qualify for a deferment program that allows you to postpone your payments temporarily. As of the first quarter of 2020—the latest reported data before the CARES Act suspended loan payments—approximately 90,000 borrowers were enrolled in economic hardship deferment, holding $3.5 billion in outstanding student loans.
If your loan servicer approves your economic hardship deferment request, you can stop making payments for up to three years.
Here’s what you should know about this deferment option and how to apply.
Economic hardship deferment is a program offered by the U.S. Department of Education specifically for federal student loan borrowers. Designed for low-income individuals, this deferment program can give you time to establish your career and increase your earnings. And depending on the type of loans you have, interest may not accrue on your loans while they are in deferment.
Note: If you have a federal direct loan, a federal Perkins loan or participate in the Federal Family Education Loan (FFEL) program, your loan payments are automatically suspended as part of the CARES Act. Until at least Sept. 30, 2021, you will not have to make any student loan payments. And the interest rate on your loans will be set at zero, making that a more useful relief option than economic hardship deferment.
To be approved for an economic hardship deferment, you must have a qualifying federal student loan and meet one of the following requirements:
As of 2021, these are the poverty guidelines and qualifying income thresholds for the 48 contiguous states and the District of Columbia:
See More See LessIf your family has more than eight people in it, add $4,540 for each person to calculate the poverty guideline.
Federal direct, FFEL and Perkins loans are eligible for economic hardship deferment. However, the interest charged can continue to accrue on some federal loans while they’re in deferment.
Direct subsidized loans Subsidized federal Stafford loans Federal Perkins loans Subsidized portion of direct consolidation loans Subsidized portion of FFEL consolidation loans Direct unsubsidized loans Unsubsidized federal Stafford loans Direct PLUS loans (grad and parent) FFEL PLUS loans Unsubsidized portion of direct consolidation loans Unsubsidized portion of FFEL consolidation loans See More See LessIf interest will accrue on your loan during the deferment period, you can decide to pay the interest as it accrues, or, you can allow it to be capitalized. That means it will be added to your principal balance when your deferment period expires.
Unpaid interest is only capitalized on direct loans and FFEL loans. It is never capitalized on Perkins loans.
Private student loans aren’t eligible for the federal economic hardship deferment program. However, there may be other ways to get relief if you cannot afford your current monthly payments.
Contact your lender to discuss your options. Some lenders have their own financial hardship programs. For example:
Before applying for an economic hardship deferment, consider the pros and cons:
To apply for economic hardship deferment, follow these steps:
While economic hardship deferment can offer up to 36 months to help get your finances in better shape, not everyone will qualify for this program. If you aren’t eligible for economic hardship deferment, and can no longer afford your current loan payments, consider these alternatives for federal student loans:
With federal forbearance programs, you can postpone payments for up to 12 months at a time if you lose a job, have major medical expenses or experienced a financial loss. You can receive forbearance for up to three years total over the loan period. However, interest will accrue on all federal loans during forbearance.
An income-driven repayment (IDR) plan can be a long-term solution to affordability concerns. Instead of lasting for only 12 to 36 months, you can use IDR plans for 20 or 25 years. At the end of your term, the remaining balance will be forgiven.
If you qualify for an IDR plan, your loan servicer can extend your loan term, and your minimum monthly payment will be set at a percentage of your discretionary income.
You can apply for an IDR plan online, or contact your loan servicer.
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Personal Finance WriterFor the past seven years, Kat has been helping people make the best financial decisions for their unique situations, whether they're looking for the right insurance policies or trying to pay down debt. Kat has expertise in insurance and student loans, and she holds certifications in student loan and financial education counseling.
Correspondent/EditorRachel Witkowski is an award-winning journalist whose 20-year career spans a wide range of topics in finance, government regulation and congressional reporting. Ms. Witkowski has spent the last decade in Washington, D.C., reporting for publications including The Wall Street Journal, American Banker and Bankrate. Ms. Witkowski's deep knowledge of government and policy aided a series of investigative stories that triggered congressional hearings on employee claims of discrimination at a federal agency and how indirect auto lenders were being reviewed by regulators.
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