How to Defer Student Loan Payments If You Are Unemployed
If you took out a student loan to fund your education, but you are currently unemployed, it is likely that you have stopped making payments. The first thing to realize is that this is not a situation that has to be handled alone. Many find themselves in similar situations. Fortunately, there are few temporary strategies you can use to avoid the fines that will begin to accumulate due to the situation.
One such strategy is to defer the loan payments until a time that you are in a position to make the required payments. The advantage of requesting deferment is that your obligation to make payments will be temporarily stopped, and interest will not be charged on the amount you owe. However, this option is only available for direct and subsidized student loans. If you took a private student loan, then most likely, you will have to pay the interest accrued during the deferment period. Some private loan services also do not allow borrowers to defer loans unless there is a particular reason. The process of deferment can be stressful, but going through the various processes to defer the loan can make a difference to your overall debt in the long run.
Step One: Initiate the Deferment Process
When you initiate a deferment process, you may be asked to show proof that you are experiencing economic hardship, that you are unemployed, that you are looking for a job or that you are going back to school for further studies. Each reason for deferment gives you different loan repayment options. The unemployment deferment option is open to people who are completely jobless, or those who currently work for less than 30 hours per week. You can instantly become eligible for the unemployment deferment if you are a recipient of unemployment benefits. If you are working less than 30 hours a week, you must show that you are seeking full-time employment at the time you apply to be considered for deferment. One way to demonstrate this is by showing proof that you have registered with an employment agency. Collect all of the necessary paperwork before speaking with a loan-servicing representative.
Step Two: Communicate With the Student Loan Servicing Provider
To get further information on the deferment process, you have to contact your loan provider. You will be directed on how to obtain unemployment deferment request forms. You can then complete the forms and submit to the loan provider for consideration. In the deferment request form, you will be asked a couple of questions to determine your eligibility. You will be asked if you are receiving any unemployment benefits. If you are a recipient of unemployment benefits, you will be asked to provide personal information, such as your Social Security Number, your name, your address and proof that you receive benefits. Other questions that you will be asked include if you are seeking full-time employment but have been unable to find a job, and whether you have rejected a full-time position. You will be asked if your application is an extension request from a previously issued unemployment deferment. If it is an extension that you are seeking, then you will be asked if you have made at least six attempts to find employment in the past six months. If you are not seeking an extension, then you will be asked if there is a public or a private employment agency within 50 miles of your address, and whether you are registered with either. All this information will be used to assess your eligibility for deferment due to unemployment.
Step Three: Wait to be Approved
If you are lucky enough to be approved for student loan unemployment deferment, the exemption will only be offered up to six months, and then you will have to apply for an extension if you haven’t found a job yet. You can renew the extension a couple of times, but not for more than three years. In case you fail to qualify for unemployment deferment, you have another option known as forbearance. Forbearance on your loan will exempt you from making payments on your student loan, even though interest will continue to accumulate. The exemption arising from forbearance can go on for a period of up to 12 months. If you were previously making payments on your loan and you are likely to be considered for deferment, you should go on making payments until such time that your deferment begins. This is important, because if you fail to remit even one payment, the loan provider will regard it as forfeiture. Consequently, your reputation as a borrower will be tarnished, because the default will be reflected on your credit score reports.