You got your student loan bill. It’s high. Really, really high.
You’re stressing. You can’t afford that high payment. Things are already tight for you.
So what do you do?
You can apply to repay your loans under an income driven repayment plan like REPAYE, PAYE, IBR, or ICR. Under one of those plans, your payment could be as low as $0 per month.
But maybe you ran the numbers and realized you can’t afford the payment offered under one of those plans.
What do you then?
At that point you should consider applying for an economic hardship deferment.
Here’s how it works.
What is the economic hardship deferment?
The economic hardship deferment1 is a type of deferment for federal student loans. This deferment allows you to temporarily pause your federal student loan payments.
Who is the deferment for?
Congress designed this deferment for people with low income or other financial troubles.
What are the eligibility requirements for the economic hardship deferment?
There are four ways to qualify for the economic hardship deferment:
- You previously qualified for the deferment under another federal loan program
- You receive public assistance benefits (Food stamps, SSI, TANF, etc.)
- You serve in the Peace Corps
- You work full-time (at least 30 hours per week) and your income is less than 150% of the federal poverty level for your family size and state.
Make sure you accurately count your family size. As is true under the income driven repayment plans, your family size includes:
- Your spouse
- Your children that get more than half their support from you
- Your unborn children that will be born during that year (for example, you or your spouse or side piece are pregnant)
It also includes other people who live with you, who get more than half their support from you, and who will live with you during the year.
Support can be money. It can be gifts. And it can be loans, housing, food, clothes, car, medical care, etc..
What types of federal student loans eligible for the deferment?
Three types of federal student loans are eligible for the economic hardship deferment: FFEL, Direct, and Perkins loans.
How long does the deferment last?
The deferment lasts for one year at a time up to three years total.
Does interest keep accruing during the deferment?
Yes, but what happens to that interest depends on the type of federal student loan you have. If you are requesting an economic hardship deferment for a FFEL or Direct Loan, then unpaid interest capitalizes. For Perkins loans, unpaid interest does not capitalize.
How do I apply for an economic hardship deferment?
You apply for an economic hardship deferment by completing the request form and submitting it to your servicer.
Make sure you submit the necessary proof (food stamp payments, pay stub, tax return, etc.) with the form.
The regulations for the economic hardship deferment are located in chapter 34 of the Code of Federal Regulations. For FFEL loans, the economic hardship deferment regulations are at 34 C.F.R. § 682.210(s)(6)(i). For Perkins loans, they are at § 674.34(e). And for Direct Loans, they are at § 685.204(g)(2)(i).↩