Payment Considerations

Changing your loan payment may be a good option if you find yourself unable to pay your federal student loan as-is. Receiving a deferment or forbearance may help you to temporarily postpone or reduce your federal student loan payments and avoid default. To get a loan deferment or forbearance, you must work with your loan servicer and apply.

Interest Deduction

Using the Student Loan Interest Deduction tax benefit can be a great way to help ease the burden of your student loans. By taking this deduction, you can reduce your taxable income by up to $2,500. To qualify, you must:

pay interest on a loan used only for qualified higher-education expenses (e.g., tuition, room and board, course-related expenses such as books and supplies, mandatory student activity fees)

have an adjusted gross income of $80,000 or less if single, or $160,000 or less if married and filing jointly

If you’re claimed as a dependent, only the person claiming you can apply for the deduction. You may not claim this deduction if your filing status is “married filing separately.” To determine eligibility and claim your education tax benefits, you must file a federal income tax return.

Deferment

Under certain circumstances, deferring or delaying your payments is a helpful way to avoid falling behind on your loans. By going into deferment, the repayment of the principal and interest of your loan is delayed with permission from the lender. If you defer a subsidized Direct Loan, subsidized federal Stafford Loan or federal Perkins Loan, you won’t accrue additional interest. All other federal loans will continue to accumulate interest during deferment, but no payment will be due. That interest may be added to the principal balance of the loan.

You may be eligible to apply for deferment of federal loans if you:

are enrolled at least half-time in college or career school

are studying in an approved graduate fellowship program

have a period of unemployment or inability to find full-time employment (3-year limit)

have a period of economic hardship (3-year limit, includes Peace Corps service)

are an Active Duty servicemember during war, military operation or national emergency

have a period of 13 months following the end of Active Duty military service or until you return to enrollment at least half-time

Many private lenders also offer deferments; the details vary by program. To request deferment, submit a request to your loan servicer. If you want to request in-school deferment, you need to contact your school’s financial aid office as well. It’s important that you continue to make payments on your student loans until you’re notified that your deferment has been granted.

Forbearance

If you don’t qualify for deferment, forbearance may be an option to reduce or stop your repayment for up to 12 months. You can be granted forbearance on federal student loans in 12-month intervals for up to 3 years. Interest will continue to accrue on your loan during this time period. If you don’t pay this interest, it may be added to your principal balance.

There are two types of forbearance your lender can grant:

Discretionary forbearance: can be requested for financial hardship or illness; lender decides whether to grant this forbearance

Mandatory forbearance: lender is required to grant; can be requested if you:

are serving a medical or dental internship or residency program and meet specific requirements

are serving in a national service position such as AmeriCorps

are performing a teaching service that qualifies for teacher loan forgiveness

are an activated member of the National Guard and aren’t eligible for military deferment

qualify for partial repayment of your loans under the U.S. Department of Defense Student Loan Repayment Program

have a monthly amount owed for all student loans exceeding 20% of your monthly income

To request forbearance, contact your lender. Just like deferment, you should continue to pay your loan until you’re notified that you’ve been granted forbearance.

Private lenders also offer forbearance, but much like deferment, these rules vary among lenders.  

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