An in-school deferment is literally buying time; it allows you to stop making payments on your federal student loans for the time you’re still enrolled in school. In order to qualify, you have to be enrolled at least half-time in an institution considered “eligible,” which includes most accredited American colleges and universities, and some institutions outside the United States. In-school deferment is primarily for students with existing loans or those who are returning to school after time away.
First, keep in mind that the term “half-time” can be tricky. Make sure you understand the definition your school uses, as not all schools define half-time status the same way. It’s usually based on a certain number of hours and/or credits. Be sure to check with your student aid office so there is absolutely no doubt. The good news is you may be eligible for an in-school deferment if you are a full-time student.
Here are a few tips that might be helpful if you’re considering deferring your federal student loans when going back to school or when you need to change your current student status.
Check to See if Your Loan Type Allows for a Deferment
The types of loans that are generally eligible for in-school deferment include Federal Direct Loans, FFEL Consolidation Loans, and Federal Perkins Loans.
Direct PLUS Loans and federal student loans borrowed by parents are sometimes eligible —you can contact your school’s student aid office to verify details. If you have a private loan, you can ask your loan servicer if they offer deferment options (some do, many don’t).
Note: Your loan servicer is the company you send your payments to, even if you have federal student loans. If you take out a Federal Direct Loan, you don’t get to choose your loan servicer; one is provided for you by the U.S. Department of Education (DoED). This servicer handles all billing, paperwork, and other administration for the DoED. If you have questions about your loan, it’s a good idea to contact that loan servicer directly.
Do the Paperwork
Complete the proper deferment paperwork and return it to your loan servicer. (Note: This link takes you to the in-school deferment request form for those with a Federal Direct Loan, Federal Family Education Loan (FFEL), and/or Federal Perkins Loan. There are request forms for other eligible student loans on the Federal Student Aid website here .)
Confirm Your Student Status
You’ll need to prove that you are enrolled as a half-time student at the very least. Before applying for in-school deferment, you’ll want to confirm your enrollment status with your school. As part of the in-school deferment approval process, you may need your school’s sign off. To make this happen and learn more about the process on the whole, you can visit your campus’ student aid office.
Keep Making Payments While You’re Waiting for a Decision
Submitting the in-school deferment paperwork does not mean that you can stop making your regular repayments. That can only happen when you receive confirmation that your deferment is approved. This usually comes from your loan servicer.
What happens if you skip payments while you’re waiting for deferment approval? Your credit score could take a hit, because they will still count as missed payments if your loans aren’t yet in deferment. The number of days that pass before your loan goes into default: 270 . That’s not even a year, and those days can go by quickly. And, in most cases, you can’t include student loan balances in bankruptcy claims.
Note: Not being able to claim student loans in a bankruptcy may soon change, according to The Wall Street Journal.
A recent survey of more than 50 current and past bankruptcy judges appointed during both Democratic and Republican administrations reveal that some may be open to helping student loan debtors. The controversy lies in the fact that most outstanding student loan debt consists of federal student loans; any cancellation of federal student loan debt would have to happen at federal government (and taxpayer) expense. For now, though, nothing changes.
Provide a Timeframe
If you’re approved, your deferral will stay in effect as long as you are enrolled in an approved institution at least half-time. However, you’ll still need to provide an exact date of when you expect to graduate, which means the official end of the deferment. If you need to extend your stay in school, and you want to extend that deferment, you’ll have to start the paperwork process all over again.
Even with an In-School Deferment, Interest May Keep Accruing
Like death and taxes, school loan interest does not usually wait or stop. If you took out an unsubsidized loan, for example, that interest will continue to add up.
You don’t have to make payments during your in-school deferment period, but it may be a good idea. If interest accrues on your loan during deferment, those charges can add up and you can easily wind up paying more than you originally would have.
If you’re concerned about extra interest on your loan, you can check the box on your in-school deferment paperwork that says, “I wish to make interest payments on my unsubsidized loan(s) during my deferment.”
If You’re Denied an In-School Deferment, You May Have Two Other Options
Your lender may grant you a student loan forbearance, which temporarily suspends or reduces your principal monthly payments, but interest continues to accrue—and you’re responsible for paying for it.
Any unpaid interest that accrues during the forbearance period is added to your principal balance, which increases the total amount you will owe.
There are two types of federal student loan forbearances: General and mandatory.
General forbearances are available for Direct Loans, FFEL Program loans, and Perkins Loans, and may be granted for no more than 12 months at a time. However, your loan servicer may set a limit on the maximum period of time you can receive a general forbearance.
Mandatory forbearances may be granted if you are serving in a medical or dental internship or residency program, among other qualifiers , generally around public service-qualifying training or occupations.
Income-Driven Repayment Plans (IDRs)
Income-Driven Repayment Plans set the monthly amount you have to repay on your federal student loans according to your income. The idea is to make your repayment plan affordable given your current financial situation.
What’s the difference between a deferment and a forbearance? Think of a forbearance as Plan B; if you’re not eligible for an in-school deferment, you may apply for a forbearance. Both are considered short-term solutions for student loan debt.
The main difference is during a forbearance period, you are responsible for paying the interest that accrues on all types of student loans during the forbearance period, whereas with deferment, you may not be responsible for the interest that accrues on certain types of loans during the deferment period. Both deferment and forbearance will be recorded in your credit report, though in different ways, but it won’t affect your credit score (unless you miss payments on that interest).
If you are considering an in-school deferment, you are not alone.
Startling Statistics on Student Loan Debt
Student debt is currently the second-highest consumer debt category , right behind mortgage debt. That means there’s more student loan debt than both credit cards or auto loan debt.
In the United States alone, more than 44 million borrowers owe more than $1.5 trillion in student loan debt .
At the end of 2016, this same figure was $1.3 trillion , which was an increase of about 170% from 2006. The key factors to these stats: more students are taking out school loans and, compared to ten years prior, borrowers owe more; students left school with approximately $20,000 in debt in 2005, which shot up to nearly $34,000 by 2015. California, Florida, Texas, and New York represent more than 20% of all U.S. loan borrowers.
The average student-loan debt of college students in the Class of 2016: $37,172. Today, 70% of college students graduate with student loan debt.
In the first quarter of 2018 alone, the total increase in student loan debt reached $29 billion; new delinquent balances (over 30 days) reached $32.6 billion; new delinquent balances of 90 days or more totaled $31 billion.
Student loan borrowers between the ages of 40 and 49 hold a collective $229.6 billion in debt, according to the Federal Reserve. If you drill those numbers down, that means American college graduates in their 40s with student loan debt each have an average balance of $33,765.
Exploring Your Student Loan Options
That sure is a lot of bad news, but it’s good to know that you have options and that you don’t have to be a statistic. If you are having difficulty meeting your monthly payments in any situation, try to contact your federal student loan servicer right away. They may even help you access the federal programs you’re entitled to using.
One way to think of an in-school deferment is that you may be getting a temporary breather, but ultimately, it’s more like putting off the inevitable. There is another way to benefit from the in-school deferment that can save you thousands of dollars in additional debt down the line. An effective preventative, proactive solution is refinancing your current loans.
Keep in mind that you can’t refinance government loans directly (typically, the closest you can get to refinancing is to consolidate eligible federal student loans). That’s because Congress fixes those rates so that they cannot be changed or renegotiated.
However, you can refinance your federal student loan repayments by taking a new loan with a private loan company, like SoFi. Doing this may give you some flexible options going forward, but will also make you ineligible for the federal benefits we mentioned earlier, like income-based repayment plans, deferment, and forbearance.
When you refinance your loans with a private loan, you can shop around for the best rates and repayment terms, and choose the loan company that feels most right to you. Refinancing can be done with both federal and private loans. When your in-school deferment ends and you start making payments, the government will get their money back while you have a new and (hopefully) improved version of your original loan.
With an in-school deferment, make sure you get the best end of the bargain. Do your research and decide if it’s going to make financial sense for you.
Student loans can get complicated—SoFi is here to help. From helping you finance your education to helping you get out of your college debt, we’ve got you covered.
Notice: SoFi refinance loans are private loans and do not have the same repayment options that the federal loan program offers such as Income Based Repayment or Income Contingent Repayment or PAYE. SoFi always recommends that you consult a qualified financial advisor to discuss what is best for your unique situation.
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