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How To Pause Student Loan Payments

For most federal loans, there are programs available to relieve the strain of monthly loan payments that can't be met. Here's a review a few of the best options out there.

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Consider the following scenario:

You're fresh out of school, armed with a shiny new degree and the natural confidence of youth. You land a coveted internship and expect to transition seamlessly into a full-time job. The world is about to be your oyster.

A few months later, your poorly paid internship hasn't lead to a job offer. Meanwhile, your student loan payments are lurking in the background, provoking feelings of anxiety every time you start thinking about making your monthly payment.

What's a freshly-minted graduate to do?

First, she should realize that she's not alone. Millions of Americans are currently dealing with similar scenarios. And all isn't lost, either. For most federal loans, there are programs available to relieve the strain of monthly loan payments that can't be met.

Let's review a few of the best options out there.

The Benefits of Loan Deferrals

According to data from the Consumer Protection Financial Bureau, roughly nine million Americans have paused their student loan payments. The most common route to doing so is through deferral or forbearance.

When taking advantage of these options, a borrower suspends loan payments for a specified period of time. For example, federal student loans may be deferred for up to three years if you can't find employment. The more nebulous category of "economic hardship" also offers up to 36 months of deferred time.

Additionally, students receive an in-school deferment as long as they are enrolled at least half-time. It's important to remember that, during a deferment period, the federal government may cover your interest on some types of loans (Perkins, Subsidized Stafford, etc.). The government will not cover interest on unsubsidized loans, however.

How Do I Qualify?

To get the deferment process moving, you need to contact the lender for each loan you're seeking to defer. This process can take some time, so it's important to start early.

If you'd like to defer payment on a Perkins Loan, you need to contact the school at which you were enrolled.

What If I Don't Qualify?

If you fail to meet the criteria for a deferral, you may still seek a forbearance. This will pause your payments for up to a year, but you'll still have interest accruing. There are two types of forbearance: discretionary and mandatory. Lenders grant discretionary forbearance based on eligibility criteria. You may request a mandatory forbearance for a variety of reasons, including:

  • Military service
  • Teaching service
  • Medical or dental residency
  • Income-based qualifications

One More Smart Option

It's important to remember that there's another option available - an income-based repayment program offered by the federal government. Depending on your income, your monthly payment may be reduced significantly - even to zero in some cases. Under the terms of this program, your loans may be forgiven entirely if you meet certain criteria, such as working a public service job or spending 20 years in the program.

The Value Of Pressing Pause

When it comes to student loans, doing nothing is always the worst outcome. Default can have terrible effects on your financial future. By taking full advantage of the various programs available to borrowers, you can buy yourself enough time to get your financial house in order.