How to use student loan deferment to put your monthly payments on pause

Key Takeaways: 

• Student loan deferment could help you pause your payments for up to 3 years or longer. 

• Deferment is different from forbearance, which has its own unique eligibility rules, time limits, and interest rate mechanisms.

• Starting on July 1, 2027, some types of deferment will disappear, which could make it more difficult to secure than forbearance.

• If you don’t qualify for forbearance or deferment, you might want to consider an income-driven repayment plan, student loan consolidation, or refinancing¹. 

Ever wonder why you didn’t have to make loan payments while you were in school? Ever wish you could go back to those days? Well, if you meet certain eligibility requirements, you just might be able to. 

The reason you weren’t on the hook for loan bills during college is because of a program called student loan deferment. Deferment simply means that your payments are put on pause, or “deferred” until a later date, though interest may still be accruing depending on the loan type. All federal loan servicers (and many private servicers) offer deferment options. 

The in-school payment pause is the one type of deferment that most borrowers are familiar with. However, it’s not the only one. You may also be able to put your payments on pause if you’re facing extreme financial hardship, undergoing cancer treatment, or participating in a program like the Peace Corps, among other reasons. Here’s what you need to know about student loan deferment—and how to tell if you qualify.

What is student loan deferment?

Student loan deferment is a tool that allows a borrower to take a break from their student loan bills. During a deferment period, your payments are put on pause, and you won’t incur any late fees or special penalties. Depending on the loan type, you may or may not still be accruing interest during deferment. Some lenders will let you renew for additional years if you still meet the requirements. 

Some types of deferment are automatic. When you’re enrolled in college at least half time, for example, your federal student loan servicer will automatically put your payments on pause. Other types require an application process and are only available to certain types of students. 

Deferment options may include:

• In-school deferment: You’re enrolled at least half-time in an eligible school. (This type of deferment is typically applied automatically.)

• Graduate fellow deferment: You’re enrolled in an approved graduate fellowship program. 

• Unemployment deferment: You’re unemployed and searching for a job. (This benefit is only available until July 1, 2027.)

• Economic hardship deferment: You can prove you’re dealing with serious economic hardship. (Like unemployment deferment, this program will sunset on July 1, 2027.)

• Full-time military service: You’re on active duty or within 13 months of concluding military operations.

• Grace period: You’re within the six- to nine-month window following your graduation from an accredited degree program. (This type of deferment is typically applied automatically.) 

• Cancer treatment deferment: You’re undergoing cancer treatment or it’s been less than six months since your treatment ended.

• Parent PLUS borrower deferment: You took out a Direct PLUS Loan on behalf of a student who is enrolled at least half-time in an eligible college or career school.

• Rehabilitation training deferment: You are enrolled in an approved training program that provides vocational, mental health, or drug or alcohol-abuse rehabilitation treatment.

• Peace Corps: You are actively serving in the Peace Corps.

What’s the difference between deferment and forbearance? 

Like deferment, forbearance is a type of student loan payment pause. This is the tool the Department of Education (DOE) used to pause payments during the Covid-19 pandemic (payments resumed in late 2023). While deferment and forbearance are similar programs, the two are not interchangeable. 

The first big difference has to do with interest. During a federal deferment period, interest only accrues on unsubsidized loans. During forbearance, however, interest always accrues, no matter what loan type you have. If you haven’t paid your accrued interest by the end of your forbearance period, it will get added to your principal balance. That will increase your monthly payment. 

The other big difference is that deferment is becoming more limited and conditional in the wake of the Trump Administration’s One Big Beautiful Bill (OBBB). Going forward, forbearance will likely be easier to get, especially in cases of job loss or financial crisis. 

There are two types of forbearance: mandatory forbearance, which applies during periods of military service or other federally protected programs, and general forbearance, which your loan servicer can choose whether or not to grant you. 

You can apply for discretionary forbearance for a wide range of reasons. And unlike the deferment options for unemployment and economic hardship—both of which will end on June 30, 2027—hardship forbearance options will remain open.  

What’s the difference between deferment and an IDR plan? 

An income-driven repayment (IDR) plan is another form of student debt relief. Like deferment and forbearance, you can apply for it through the Department of Education. But unlike these programs, an IDR plan isn’t a payment pause; instead, it recalculates your student loan payment based on a percentage of your discretionary income. 

Under an IDR plan, your student loan bill won’t increase unless your income does. If you’re still making payments after 20 to 30 years (depending on your plan type), any remaining debt will be forgiven.

IDR plans are great because they let you keep chipping away at your student loans even if you can’t afford to pay as much as you once did. And, unlike with a forbearance or deferment period, you can keep making progress toward student loan forgiveness. You also won’t have to worry about accrued interest capitalizing—i.e. getting tacked onto your principal balance—the way you would at the end of a deferment or forbearance period. 

How student loan deferment affects your payment plan

Only some types of loans accrue interest during deferment. Here’s how to figure out what yours will do.

Subsidized federal student loans

If you have a federal Perkins loan or a subsidized Stafford or Direct loan, the Department of Education will pay the interest on your federal loan throughout your deferment period. When the period ends, you’ll pick up right where you left off—no interest capitalization, and no increase in your monthly payment.

Unsubsidized federal student loans

If you have an unsubsidized federal loan—including Direct PLUS loans—the government will not pay your interest during your deferment period. 

That leaves you with three choices: 

• You can choose to make interest-only payments while you’re in deferment. This will keep interest from stacking up on you over time. 

• You can wait and pay off all the accrued interest right before the deferment period ends. This will require a hefty lump-sum payment, but it will keep the interest from capitalizing. 

• You can let the accrued interest capitalize. If you choose this route, your total loan cost will likely increase, and you’ll probably be left with a bigger monthly payment after the deferment period ends.

Private student loans

These days, many private student loan servicers also offer deferment and forbearance programs. However, each one has its own policy when it comes to interest accrual.

As with federal loans, you can choose to pay only the interest during your deferment to avoid it being added to your principal balance. Or, you can allow it to accrue and pay it off later with the rest of your loan. If you’re not sure what your servicer’s policies are, give them a call. 

When deferment makes sense—and when it doesn’t

Student loan deferment might make sense if you’re attending a specific education program, serving in the Peace Corps or the military, or facing a short-term setback that’s easy to prove with clear documentation. If your financial woes don’t clearly fit into the Department of Education’s preset categories, then you might want to try for a forbearance period instead. 

Neither deferment nor forbearance makes sense if you’re dealing with more chronic hardship. Deferment programs are typically only available for up to three years, and forbearance will soon be limited to 9 months out of every 24. If you need a long-term solution, try one of these alternatives.

Alternatives to student loan deferment

Here are a few other ways to postpone your payments, or at the very least, make them more manageable.

Income-driven repayment plans

If you’re having trouble making your student loan payments, it’s worth checking to see if you’re eligible for an income-driven repayment (IDR) plan. 

With an IDR plan, your monthly payment is based on your discretionary income—money left over after paying basic expenses like housing, utilities, food, and transportation. Most IDR plans cap your monthly payment at 10% to 20% of your discretionary income. 

Current income-driven repayment plans allow you to pay off your student loans over 20 to 25 years. Starting in 2027, a new IDR plan—called the Repayment Assistance Plan (RAP)—will come online. RAP operates on a 30-year repayment timeline. 

One significant perk of income-driven repayment plans is that any outstanding balance is forgiven when the 20- to 30-year repayment period has ended. However, you must make all your payments on time, and you’ll owe income taxes on any amount forgiven.

• Not sure which plan is right for you? Use a free online platform like the DOE Loan Simulator, or Earnest’s Payoff Path² tool. With Payoff Path, you can visualize all your debts in one place, input your financial goals, and calculate which plan will potentially save you money in the long run.  

Student loan consolidation

If your challenges are more organizational than financial, you might want to consider student loan consolidation. This is a federal tool that lets you lump a handful of different federal loans into a single new loan, called a Direct Consolidation loan. That means fewer bills and deadlines to keep track of, and just one loan servicer to worry about.  

The other upside to consolidation is that it can help you make your monthly payments more affordable by extending your repayment term. If you switch it from 10 to 20 or 25 years, you’ll make more payments spread out over a longer period of time. But while you’ll pay less each month, you might pay more in interest over the long run. 

Student loan consolidation cannot help you lower your interest rate, and it is only available for federal loans. If you have private loans—or if you want to combine federal and private loans into a single new loan—you’ll want to consider refinancing.

Student loan refinancing

If you got stuck with high interest rates when you first took out your student loans, refinancing could help you lower them. Get a good deal on a rate, and your loans could get significantly more affordable. 

You can refinance federal student loans, private student loans, or a combination of the two. You can also use refinancing to extend your loan term, change your loan servicer, and switch from a variable to a fixed interest rate (or vice versa). 

How refinancing works

When you refinance your student loans, you’ll apply for a loan with a private lender of your choice. During the application process, the lender will look at your financial record—including your credit score, employment history, income, education, and debt profile. This information will help the lender determine the interest rate they can offer you on your new refinance loan.

Borrowers with good or excellent credit generally qualify for the lowest interest rates. If your application is approved, the new lender will pay off your old loans and issue you a brand-new loan in their place. Then you’ll start making payments on the new loan.

Be aware that if you refinance a federal loan with a private loan servicer, that loan will become private debt. You cannot switch it back. That means you’ll forfeit access to federal student loan forgiveness like Public Service Student Loan Forgiveness (PSLF). If you’re planning to take advantage of these programs, those benefits are worth more than any interest savings refinancing might offer. But federal student loan forgiveness has just an 11.2% acceptance rate, meaning many borrowers are holding out hoping for federal forgiveness protections they statistically won't unlock. And private lenders often offer their own suite of benefits. 

Budget adjustments

Many students struggle to pay their student loans because of financial circumstances outside of their control. Many others simply don’t have a good grip on their spending. If that sounds like you, don’t worry; we’re not judging. This stuff is hard!

That said, if your payments feel unaffordable and you don’t qualify for any of the solutions above, it might be time to take a peek at your budget. Start by writing down every penny you spent over the last month. Lump each expense into a category, like rent, utilities, transportation, supplies, clothing, entertainment, etc. Then add up the expenses in each category. 

• Which amounts seem reasonable? 

• Which ones seem like they could use some trimming?

Be honest with yourself, and figure out which behaviors you can work on to rein in your spending.

How do I request a student loan deferment?

You’ll need to contact your student loan servicer to request a deferment. Most will require you to explain your reasoning and provide documentation proving your financial circumstances. In the case of job loss, for example, that might be proof that you’re receiving unemployment benefits. Continue making payments as usual until your request is approved.

Can I skip just one student loan payment?

Not everybody needs 9 to 12 months of relief. Sometimes you just need a quick breather to help you get over a small financial hurdle. If that’s your situation, contact your loan service provider to check your options. With Earnest, for example, you may have the option to skip a payment³ once every 12 months, as long as your loan is in good standing and you’ve made at least six months of on-time payments in a row. 

See how much you could save with Earnest

If you’re having trouble making your student loan payments, you may be able to use either deferment or forbearance to put your payments on pause for a limited period of time. However, these options have very specific eligibility requirements, and not everyone qualifies. If you’re hunting for a long-term solution with a higher likelihood of lifetime savings⁴, refinancing might be worth a second look.

Refinancing can help you lower your interest rate, reduce your monthly payment, and even get out of debt faster. Want to see whether you could benefit? Check your rate today. It takes just minutes, and won’t impact your credit score.

Disclaimer: This blog post provides personal finance educational information, and it is not intended to provide legal, financial, or tax advice.

1 Please note that you will lose benefits associated with your underlying federal loans, such as federal Income-driven Repayment Plans, Economic Hardship Deferment, Public Service Loan Forgiveness, or other deferment and forbearance options, if you refinance into a private loan. If you file for bankruptcy, you may still be required to pay back this loan.

2 Payoff Path is offered by Earnest, and earning or applying benefits (if any) depends on eligibility, your financial profile, and applicable policies. Terms and conditions apply; see Earnest’s Terms of Use and Privacy Policy for full details. Offers, features, and availability are subject to change without notice.

3 Earnest clients may skip a payment through a one, one-month forbearance during a 12 month period. Your first request to skip a payment can be made once you’ve made at least 6 months of consecutive on-time full principal and interest payments, and your loan is in good standing. The interest accrued during the skipped month will result in an increase in your remaining minimum payment. The final payoff date on your loan will be extended by the length of the skipped payment periods. Any unpaid accrued interest may capitalize (added to the principal balance) at the end of the forbearance period by adding unpaid accrued interest to the outstanding principal as permitted by law and the terms of the loan agreement.

Interest will not be capitalized on loans originated to Michigan residents under the Regulatory Loan Act of 1963. Please be aware that a skipped payment does count toward the forbearance limits. Please note that skipping a payment is not guaranteed and is at Earnest's discretion. Your monthly payment and total loan cost may increase as a result of postponing your payment and extending your term.

4 Choosing to refinance to a longer term may lower your monthly payment, but increase the amount of interest you may pay. Choosing to refinance to a shorter term may increase your monthly payment, but lower the amount of interest you may pay. Review your loan documentation for the total cost of your refinanced loan.