Student Loan Economic Hardship Deferment: What It Is, Who Qualifies, and How to Apply

If you reach a point where your income can’t support your student loan payments, economic hardship deferment can help. If your lender offers deferment, you could postpone payments for up to three years.

However, not everyone will qualify for deferment. Read on to determine whether student loan deferment for economic hardship is the right move for you.

How economic hardship deferment works 

The U.S. Department of Education offers economic hardship programs through your student loan lender. The program began to help borrowers with low income temporarily pause payments they can’t afford. 

Humanitarian workers in the Peace Corps or AmeriCorps can also qualify for deferment. Since these programs often pay a small income in addition to room and board, repaying student loans isn’t always possible. 

One significant downside of economic hardship deferment is that, for many loans, interest will continue to accrue. So when you resume payments, you’ll also end up paying back interest.  

Economic hardship deferment for federal student loans

The government’s deferment program is only for government-funded loans—that is, federal student loans. In most cases, you can defer federal student loans due to hardship for up to three years. However, the exact length is on a case-by-case basis and depends on your income and reason for requesting a deferment.

Per the deferment application, each period of deferment lasts 12 months, so you must reapply every year. 

Typically, you are not response for paying interest that accrues on a federal student loan, but there are some types for which you are. Below is the list of federal student loans eligible for deferment, as well as if you are responsible for paying the interest during deferment.

Federal loan	Responsible for accrued interest?
Direct Subsidized Loans	✅
Direct Unsubsidized Loans	✖️
Direct PLUS Loans	✅
Federal Perkins Loans	✖️
Federal Stafford Loans	✅ (unsubsidized version)
Federal Family Education Loan (FFEL) PLUS Loans	✅
Direct Consolidation Loans	✅ (unsubsidized portion)
FFEL Consolidation Loans	✅ (unsubsidized portion)

How to apply

To apply for economic hardship deferment for your federal student loans, complete the Economic Hardship Deferment Request form and submit it to your servicer. 

To be approved, you must meet at least one of the following requirements:

• You receive public assistance payments, including Temporary Assistance for Needy Families (TANF), Supplemental Security Income (SSI), or Supplemental Nutrition Assistance Program (SNAP) benefits.
• You’re a Peace Corps volunteer. 
• Despite working full-time, your income is no more than 150% of the federal poverty guideline for your state and family size.

On the four-page application, you need to input basic information such as your name, address, Social Security number, and phone number. 

The next page is about eligibility, with “yes” or “no” questions about the requirements mentioned above. 

You’ll also share your income and family size to help prove eligibility. The rest of the form explains how the program works and what you’re expected to pay in interest. 

Economic hardship deferment for private student loans

The federal economic hardship deferment program is not available for private student loans. It’s one of many differences between private and federal loans.

But that doesn’t mean you don’t have options for private loans. Some lenders offer their own deferment programs, although many are for shorter terms than the federal option. 

If you can’t make your payment and are considering deferment, contact your lender to see your options. If deferment isn’t available, it may offer other programs. 

The four companies below offer deferment (or similar) programs for student loan borrowers who cannot pay. Click the lender name to learn the details about its deferment program.

Lender	Deferment length
Discover	Varies by deferment option
Earnest	12 months of forbearance for economic hardship; deferment for length of active duty + 180 days for military members
Laurel Road	12 months
SoFi	The length of active duty or the length of graduate school

Discover

Discover no longer accepts new student loan applications, but if you currently have student loans through it, it offers deferment to borrowers in specific situations, including:

• If you are attending school
• Active duty military
• While working for a public service employer like the Peace Corps
• During medical residency. 

You can request deferment from Discover using 2-page application.

Earnest

Earnest offers 12 months of forbearnace for economic hardship if you qualify.

Active military members can defer their student loan payments for the length of their active duty plus 180 days after.

In addition, Earnest allows all borrowers to skip a payment each year if they need to, which can be helpful in giving you some wiggle room for a month.

Apply for forbearance using Earnest’s form.

Laurel Road

Laurel Road allows you to defer your loan for up to 12 months if you can prove temporary financial hardship, but only in three-month increments (and they can’t be consecutive). 

Those facing a natural disaster can apply for up to two months of forbearance.

Contact Laurel Road’s customer service department to see whether you qualify. 

SoFi

SoFi offers deferment for military members serving active duty and graduate students enrolled part-time or full-time. To see if you qualify for deferment, contact SoFi’s customer support.

Should you submit an economic hardship deferment application?

Applying for economic hardship deferment isn’t ideal. It often means your income can’t support your everyday expenses and student loans. If you’ve reached this point, ask yourself these questions:

• Do I have a loan that qualifies for deferment? No other question matters if you don’t qualify for federal or private deferment. If you don’t have a low income or are not involved in a public service career, you may not qualify for deferment. 
• Will I be able to resume payments in the next few years? Deferment only lasts so long. Federal programs grant up to three years, while many private lenders offer just a year. If you know you won’t be able to pay your student loans even after that time, you may need a better long-term solution. 
• Have I exhausted all other repayment options? Deferment shouldn’t be your first option because interest often continues to grow on your unpaid balance. Make sure you’ve talked with your lender for assistance in making a final decision. 

If you answered yes to any of the questions above, student loan deferment might be the right option. 

Alternatives to economic hardship deferment

If you can’t secure deferment due to your income or loan type but can’t pay your loans, what should you do? 

Your options if you can’t pay your student loans include the following.

Forbearance

Forbearance is another method of delaying payments. You may qualify if you’ve lost your job, have a major medical issue that results in a considerable expense, or have experienced a significant financial loss. 

All federal loans come with forbearance options if you are eligible. Interest will continue to accrue on federal loans in forbearance. 

Private student loans may also have a forbearance option, but this varies by lender. 

Refinancing 

If you can’t afford the high interest that may come with your federal student loans, you can refinance through a private lender, ideally securing a lower interest rate. Private lenders often offer low rates for borrowers with good credit as an incentive. 

Before you decide whether refinancing is right for you, understand the benefits you stand to lose. You’ll give up income-based repayment options and loan forgiveness by switching from a federal to a private loan. Private loans also don’t qualify for the federal student loan pause that’s in effect due to COVID-19. 

Loan forgiveness 

In rare instances, student loans can be partially or entirely forgiven. The program with which most are familiar is Public Service Loan Forgiveness. This program allows those who work in nonprofits, government agencies, or tribal governments to qualify for forgiveness after meeting certain conditions. 

It can be challenging to qualify. In addition to working for a specific type of employer, you must have been enrolled in a federal repayment plan for your student loan and made 120 qualifying monthly payments under that plan.   

Changing your repayment plan 

Many federal student loan lenders, and some private lenders, offer multiple repayment plan options. One of the most common is income-based repayment. As the name suggests, the plan is based on your income. This option caps your student loan payments at 10% to 20% of your income. 

You should have no issue qualifying if your student loan debt exceeds your discretionary income. You will need to show the standard 10-year repayment plan many federal student loans are subject to isn’t working for you. 

In addition to the income-based repayment option, you can consider options such as Pay as You Earn (PAYE) and Income-Contingent Repayment (ICR). With PAYE, your student loan payments are capped at 10% of your income over 20 years. 

ICR, meant for Parent PLUS loans, allows you to pay either of the following: 

• Up to 20% of your income
• The amount you would pay with a 12-year repayment plan

Find out more about student loan deferment.