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Student Loans Student Loan Repayment

How to Handle Student Loans While On Medical Leave

Updated Apr 05, 2023   |   7-min read

For people who suffer injury or illness or for those who need to take care of someone in their family who is sick, medical leave can be a true blessing. It allows you to take time off work to recover or help your family member—and your job is still there when you are better or can return to work.

Whether you’re working or not, however, like many of your other bills, student loan payments are still due each month, and if you’re off work due to medical issues, you might be worried about how you can pay for those loans when you aren’t getting a paycheck.

Luckily, in most cases, you will have several ways to keep your student loans in good standing.

On this page:

Managing Student Loans on Medical Leave

Illness and injury can take a debilitating toll on all facets of your life – including finances. While all aspects of your finances may be impacted, student loans are often seen as less important debt that can wait to be paid.

Most workers who are on medical leave tend to think more short-term; they worry about how to pay the mortgage or credit cards, or they’re worried about their credit score.

Unable to pay all of their monthly obligations, they often prioritize “the big things,” including housing. In reality, however, not paying your student loans can result in default which can ruin your credit long past when you return to work.

Rather than setting aside your student loan payments to focus on groceries or the light bill, check out the following options that can help you stay on your feet financially, even while you’re on medical leave.

Student Loan Deferment

The first option is student loan deferment which temporarily suspends payments for a set amount of time.

If you have subsidized federal student loans, you may even be able to get out of paying the interest that accrues during that time. With unsubsidized federal loans, however, you will have to pay that accrued interest. You can make those interest-only payments while you’re in deferment—and if you’re financially able to, that’s a very smart move—but you don’t have to; you can choose to leave the interest and let it capitalize onto your balance.

Deferment isn’t automatic, though. You’ll need to contact your servicer to request it. They will usually ask for some kind of documentation showing that you are eligible for the type of deferment you are requesting.

With an Economic Hardship Deferment, you’ll need to show that you are experiencing a financial hardship due to your medical leave and offer evidence of your being on leave and unable to work. You may also need something from your doctor outlining that you’re off work and for how long.

To apply for deferment on federal student loans, you’ll need to complete the Economic Hardship Deferment Request and submit it to your servicer. You may want to also call them to ensure receipt and handle any follow-up to keep things moving along.

If you have private student loans, you’ll have to check with your servicer to see what your options are. Depending on your lender, you may or may not be eligible for deferment.

After you’ve received your deferment, make sure that you keep your servicer informed of any changes. If you go back to work, let your servicer know immediately so your payments can get back on track.

Student Loan Forbearance

There are two kinds of student loan forbearance—general and mandatory. For a medical leave, you’ll come under a general forbearance, which allows you to pause payments for up to 12 months. Unlike deferment, if you are off work for longer than 12 months, you can request another forbearance.

If you have a Perkins Loan, you can only be in forbearance for up to three years. For Direct Loans and FFEL Program Loans, there is no fixed limit from the federal government. There may, however, be a limit on what your individual servicer will allow; check with them to see what that limit is.

Keep in mind that during a forbearance, interest continues to accrue and will capitalize onto your balance, so the amount you owe will increase as long as you are on it and not making payments.

Just how much will your balance increase during this time? Check out our Student Loan Deferment & Forbearance Calculator to find out.

When you come off of forbearance, you’ll see that you now owe more than you did when you applied for it. Your credit report, however, will show that the loans aren’t late, they’re just deferred.

You can apply for a forbearance by completing the General Forbearance Request and submitting it to your servicer.

Income-Driven Repayment Plans

If the idea of accruing and capitalizing interest with no payments sounds like more stress you don’t need, or if you don’t want to completely stop paying for the time being, you could also apply for an Income-Driven Repayment Plan.

The federal government has several that can help you get your payments to a manageable level and are one of the best options for people who are struggling with payments. You’ll need to update any income and family size data each year, whether it changes or not—and you’ll be asked for documentation of both.

Income-Based Repayment (IBR) Plan

The IBR plan caps your payment at 10% to 15% of your discretionary income, which is defined as what’s left over after food, clothing, shelter, and medical care.

Use our Income-Based Repayment Calculator to find out exactly how much your payments will be.

You may end up needing to decrease any additional spending; suspending or ending streaming subscriptions and your coffee or dining out habits are often good ways to help have more money during a temporary financial crisis.

Pay As You Earn (PAYE) Plan

With PAYE, you’ll still pay the 10% of discretionary income, but no matter how much you make, the payment is capped at whatever your normal payment was under the Standard 10-Year Plan, which means you won’t ever pay more than you’re currently paying.

Unfortunately, if you need to lower your payment while on medical leave, the PAYE plan may not be the best option. It doesn’t count your spouse’s income unless you’re filing married jointly, so you may get a reprieve; check the math before signing up for this plan.

Revised Pay As You Earn (REPAYE) Plan

The REPAYE option is much like the PAYE, but with this program, your spouse’s income gets counted in the total assessment regardless of how you’re filing your taxes.

>>Read More: PAYE vs. REPAYE

Income Contingent-Repayment (ICR) Plan

With ICR, you’ll pay the lesser of 20 percent of your discretionary income or your fixed standard repayment for 12 years. After 20 years you may get any outstanding balance forgiven; just keep in mind that you’ll have to pay taxes on the amount that goes away, because it’ll be counted as income.

Bottom Line

If you’re going through a serious illness, experienced a severe injury, or are otherwise unable to work, life for you and your family is likely already stressful enough. If you’re having to worry about how you’ll make your student loan payment too, that only adds to that stress—and can even interfere with your recovery.

Take the steps to protect your credit by being familiar with the options available to you. Some of these options may not work for you, but others might. Student loan servicers are able to explain what your personal options are, and only you can decide from there which will work best for you and your family.

Once your student loans are handled and your credit is protected, you can focus on more important things like getting healthy.

>> Read More: Student loan repayment guide