Should I use a deferment or forbearance to delay repaying my student loans while I serve in the military, volunteer in the Peace Corps, or participate in a national service program?
You probably should not put off repaying your student loans while you are in the military, the Peace Corps, or a national service program. You may have other options.
If you’re short on cash, you may look for a deferment or forbearance as a short-term fix, but it could make paying back your loans more expensive. Before accepting a deferment or forbearance, consider a few things:
- Deferment and forbearance will increase the total cost of your loan. When you put off making payments, interest may keep adding up depending on the type of loan you have. This means that after you complete your service, your student loan balance will be bigger.
- You may also miss the chance to count your service toward loan forgiveness. If you have qualifying loans, every month that you serve while enrolled in an income-driven payment plan counts toward Public Service Loan Forgiveness (PSLF). Under this program, if you make 120 qualifying monthly payments while working for an eligible public service organization, you can have any remaining balance forgiven on your qualifying loans.
- Income-driven repayment plans are the best bet for most borrowers. If you have federal Direct Loans, an plan, like Income-Based Repayment (IBR), Pay As You Earn (PAYE), or Revised Pay As You Earn (REPAYE), is the best plan for most people working in public service. Your monthly payment may be as low as $0 per month, but you’ll make progress toward loan forgiveness each month that you’re enrolled.
- You may qualify for other benefits, too. For example, servicemembers might be able to lower their interest rate for pre-service loans under the Servicemembers Civil Relief Act (SCRA). If you are a Peace Corps volunteer or servicemember with a Perkins loan, you might be able to have your loan canceled. Check your eligibility for these benefits before consolidating your loans – otherwise, you could lose your eligibility for these benefits. Contact your student loan servicer to learn more about benefits for borrowers engaged in public service.