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Deferral of unemployment allows you to defer federal student loan repayment for up to 36 months. To qualify, you must be in receipt of unemployment benefits or work part-time while seeking full-time employment.

If the coronavirus pandemic has affected your work, you don’t need to request a student loan deferral at once.

The federal government is defer federal student loan payments interest-free for nine months until September 30, 2021. You don’t need a request or documents to request this break – your server will apply it automatically.

After this period of relief is over, deferring unemployment is usually best if you plan to start working again soon. Otherwise, a better long-term strategy is to enroll in a income based repayment plan that ties payments to your financial situation.

Private lenders may allow you to defer payments if you are unemployed or experiencing financial difficulties. Interest always accrues during these breaks, increasing the amount you owe. Contact your lender for more details on their deferral and forbearance policy.

Apply for a suspension of unemployment

You will need to submit a application for suspension of unemployment to your student loan manager to take advantage of this deferral. Along with your form, you need to do one of the following for approval:

  • Attach proof of unemployment benefits. You must provide documents that show you are currently eligible for unemployment, such as a copy of your benefits from your state’s Department of Labor. This documentation should include your name, address and social security number.

  • Confirm that you are looking for a full time job. You must have made at least six attempts in the past six months to get a full-time job. You must also be registered with an unemployment agency, unless there is none within 50 miles of your home. Using a temp agency or a job search website does not count.

You can also get relief from unemployment if you are underemployed – working, but not full time. This means a job of less than 30 hours per week and which will not last more than three consecutive months. You cannot qualify if you have rejected a recent offer of full-time employment, even if you were overqualified for the position.

If you meet the conditions for a deferment of unemployment, your service agent cannot refuse your request.

How long does an unemployment deferment last

You can get up to 36 months of unemployment relief, but not all at once. You will need to reapply for the deferral – and meet the stated qualifications – every six months.

The length of the deferral also varies depending on the type of loan. If you had a Federal Family Education Loan, or FFEL, prior to July 1, 1993, your maximum unemployment deferral is 24 months. Perkins borrowers can receive 36 months, but in 12 month increments.

All unemployment deferrals end once you have exhausted your eligibility or obtained a job. Once you are working full time, you must leave your attendant know immediately.

Other options for reduced loan repayments

If you’ve returned to work or don’t qualify for deferral of unemployment, other options that reduce payments may prevent you from student loan default. The best choice will depend on your financial situation:

  • If you can’t pay your current payments. Income-based repayment plans set your monthly payments as a percentage of your discretionary income. These plans will extend your repayment term to 20 or 25 years, potentially increasing the amount you repay. Income-based payments can be as low as $ 0, but many factors affect the calculation.

  • If you can’t afford anything, even income-based payments. Economic hardship deferral is available if you work full time and meet one or more of the following qualifications: serve in the Peace Corps; receive help from a program such as the Supplemental Nutrition Assistance Program (SNAP); or earn less than 150% of the poverty line for your family size and state of residence.

  • If you catch up with other financial priorities. Once you get a paycheck again, you may have more urgent bills to pay than student loans, like a high interest credit card. Student loan abstention allows you to suspend payments at the discretion of your lender. This is not a good long-term option since interest accrues on all loans – although the government is currently waiving interest for 60 days, retroactive to March 13 – but forbearance may provide temporary leeway.