Definition and Example of In-School Deferment
In-school deferment is a temporary postponement of repayment of federal student loans that students can obtain while enrolled in college, and in some cases, for six additional months after they cease to be enrolled. It allows you to ease your financial burden while you're in school and to focus on your education.
For example, if you have graduated from a bachelor's degree program but are taking classes half-time for a master's degree, you can get an in-school deferment.
How In-School Deferment Works
It’s tough to cover your expenses, much less pay down debt, when you’re a student. Studying, attending class, and completing your coursework leave little time for earning an income. If you have existing student debt and attend school, in-school deferment can give you the breathing room you need to continue your education without having to make your monthly loan payments.
For example, suppose that Mike took out a Perkins Loan and enrolled at least half-time at an eligible college. His school places his loan into deferment automatically, owing to his enrollment status and school. As such, his loan payments are on pause starting from the date he began to meet the deferment-eligibility criteria and ending on the later of the date when he no longer meets the criteria, or, if requested, for an additional six months after he graduates, withdraws or falls below half-time status. During the deferment, he's not required to make payments on his loan principal, nor will he have to pay interest on his loan because of his loan type.
Unpaid interest is only capitalized on Direct Loans and FFEL loans, never on Perkins Loans. Perkins Loans were discontinued in 2018, but some students are still paying them off.
Students generally aren't responsible for paying interest that accrues on Direct Subsidized Loans, Perkins Loans, or the subsidized part of Direct Consolidation Loans and FFEL Consolidation Loans. They are, however, responsible for paying interest on Direct Unsubsidized Loans, Direct PLUS Loans, FFEL Plus Loans, and the unsubsidized part of Direct Consolidation and FFEL Consolidation Loans.
If you're on the hook for paying interest on your loans during deferment, you can pay the interest as it accrues or let it accrue and be capitalized or added to your loan principal at the end of the deferment. Keep in mind that if you let the interest accrue, the total you'll pay in interest over the life of your loan may be higher. If you want to pay the interest, while completing your in-school deferment form, look for the option that says: “If checked, to make interest payments on my loans during my deferment.”
Requirements for In-School Deferment
To take advantage of an in-school deferment, you must:
- Have an eligible student loan: Federal Direct Subsidized, Unsubsidized, and PLUS Loans; Federal Family Education Loans (FFEL); and Perkins Loans are generally eligible. Some private student loans also allow deferment, though lenders might use different criteria and typically only allow deferment for up to one year.
- Be enrolled at least half-time in an eligible college or career school as an undergraduate, graduate, or professional student: An eligible school is one that the U.S. Department of Education has approved to participate in Federal Student Aid programs, even if it doesn't actually participate in them.
How to Get In-School Deferment
If you're enrolled at least half-time in an eligible school and have federal student loans, you will most likely be placed in deferment automatically. But your loan servicer—the company that sends loan statements to you, even if you’ve borrowed federal student loans—should still notify you that the deferment has been granted.
If you're eligible for an in-school deferment but haven't heard from your servicer, contact your school so it can reach out to the servicer with your enrollment information and establish your eligibility. Alternatively, request an in-school deferment from your servicer by following the steps below:
- Complete forms: Download the In-school Deferment Request Form from the federal government's student financial aid website, fill it out, and then send it to your loan servicer. You may also find the forms on your loan servicer's website.
- Verify enrollment: Your loan servicer will verify that you are enrolled at least half-time. This can happen electronically, but in some cases, you’ll need an official at your school to sign off on your request. If so, visit your student aid office to get verification.
- Wait for approval: Keep making the payments on your loan until you get confirmation from your loan servicer that your request was approved. If you miss payments before your deferment becomes active, you could become delinquent on your loan, risking default, and your credit scores can suffer, too.
Parents who took out Direct PLUS Loans for a child who meets the above eligibility criteria may be eligible for another type of deferment known as a "Parent PLUS borrower deferment." Interested parents should fill out and send in a separate form: the Parent PLUS Borrower Deferment Request. If you're a parent borrower of a Direct PLUS Loan that was disbursed, or paid out, on or after July 1, 2008, you may be eligible for an additional six-month deferment (if you elect it) after the enrollment requirements cease to be met.
If your request is approved, you can stay in deferral for as long as you continue to meet the requirements, which means enrollment in an approved institution at least half-time. As a Perkins Loan recipient, your loan will also be deferred for six months from the date you stop meeting the requirements; this is known as the "post-deferment grace period." Similarly, graduate or professional students with Direct PLUS Loans disbursed on or after July 1, 2008, may elect to defer loan payments for an additional six months after they stop meeting the requirements.
Generally, borrowers who have not elected (or qualified) to defer payments will be expected to begin repaying the loan as soon as it's been disbursed.
Alternatives to In-School Deferment
If your request is denied, contact your loan servicer immediately if you feel you will have a hard time making payments. You might have other options, namely:
- Forbearance: This option allows you to stop or reduce your required monthly payments if you're facing financial difficulties, medical expenses, or a change in employment. You'll still be responsible for paying interest that accrues on your debt during the forbearance period.
- Income-driven repayment plans: If you believe you'll be unable to make payments for an extended period, consider these plans instead. They allow you to make smaller monthly payments—in some cases, no payment—depending on your income and family size. You can use the Department of Education's repayment estimator to assess what your payments might be with one of these plans.
- An in-school deferment is a type of student loan deferment that lets you pause payments on your student loans while you’re still enrolled in school.
- It pauses your loan payments (and also interest payments, depending on the loan type) from the date you begin to meet the deferment-eligibility criteria until the later of the date when you no longer meet the criteria, or, if eligible, an additional six months after that.
- Eligible criteria include half-time enrollment in an eligible school and a federal student loan, though some private loans may be eligible for an in-school deferment.
- Students who meet the criteria will often be placed in deferment automatically, but those who aren't can complete a form to request a deferment.