Recent reports estimate that student loan borrowers expect to repay their debt within ten years—however, experts agree that it often takes twice as long.

A lot can change within that twenty-year time frame. Changes in employment, an unexpected illness, or a growing family will mean fluctuations in your finances. Still, it’s good to know that while your life may change, there will always be resources available to help you manage your federal student loan payments.

Deferment and Forbearance

Deferment and forbearance offer you opportunities to either postpone your payment or temporarily reduce your monthly payment under certain circumstances. Making the decision to place your loans in either deferment or forbearance will help you to avoid falling into default.

The difference between deferment and forbearance is that under deferment, certain loans do not accrue interest. Under forbearance, all loans continue to accrue interest while you take a break from paying your loans.

The following loans do not accrue interest under deferment:

• Direct Subsidized Loans
• Subsidized Federal Stafford Loans
• Federal Perkins Loans
• Subsidized portions of Direct Consolidation Loans
• Subsidized portions of FFEL Consolidation Loans

The following loans do accrue interest under deferment:

• Direct Unsubsidized Loans
• Unsubsidized Federal Stafford Loans
• Direct PLUS Loans
• FFEL PLUS Loans
• Unsubsidized portions of Direct Consolidation Loans
• Unsubsidized portions of FFEL Consolidation Loans

You have the option to either pay the interest on the loans that accrue interest while in deferment, or you can add the interest to the principal.

Am I eligible to apply for deferment or forbearance?

There are several circumstances that may make you eligible for deferment. You may qualify for deferment if you are enrolled at least half-time in a qualifying college, university, or career training program. Other eligible programs include participation in graduate fellowships or rehabilitation programs related to substance abuse.

You may also qualify if you are unemployed or unable to find full-time employment, under economic hardship, serving in the Peace Corps, or on active duty military service.

Eligibility for forbearance is a bit more complicated. There are two types of forbearance—general and mandatory. It is the organization servicing your loan that makes the final decision for general forbearance. Circumstances that may make you eligible for forbearance include financial difficulties, medical expenses, change in employment, etc.

Mandatory forbearance may be granted if you are enrolled in a medical or dental internship or residency, you are serving in Americorps, you are currently in a period of economic hardship, you are a teacher, you qualify for partial repayment via the U.S. Department of Defense Student Loan Repayment Program, or you are serving in the National Guard.

How do I apply for deferment or forbearance?

Applying for deferment or forbearance generally only requires filling out a form via your loan servicer. If you are enrolling in an eligible college, university, or career training program again after some time away, your government loans will automatically be put into deferment in most circumstances.

It’s important to remember that the act of applying for deferment or forbearance does not automatically mean that you are no longer responsible for making your monthly payment. Expect to continue to make your monthly payments until you have been notified that your deferment or forbearance has been approved.

Income-Driven Repayment Plans

Income-driven repayment plans are a great way to ensure that your payments don’t exceed your available income. No matter what stage of your career you’re in, an income-driven repayment plan may work well for you.

Once your loans go into repayment, everyone is automatically enrolled in the Standard Repayment Plan. This plan allows you to repay your loans within 10 years. The challenge with this plan is that the more money you owe, the higher your payments will be. In addition, it does not take into consideration your yearly income, family size, or cost of living. An income-driven repayment plan gives you options on how to manage your monthly student loan payments.

There are four types of income-driven repayment plans. Here’s a brief look at the four programs:

Income-driven repayment plans require that you continue to certify your income every year to determine a new payment. Talk to your loan service provider to inquire about which income-driven repayment plan is best for you.

Public Service Loan Forgiveness

The Public Service Loan Forgiveness program allows your loans to be forgiven while working full-time in certain qualifying government and not-for-profit organizations. Full-time equates to a minimum of 30 hours per week. Participation in the program requires that you make at least 120 qualifying monthly payments before your loans can be forgiven.

At the present time, only Direct Loans are eligible for inclusion under the Public Service Loan Forgiveness program. You may be able to include other loans like FFEL or Perkins Loans under the same program if they are consolidated under the Direct Consolidation Loan program. However, it is important to remember that your 120 qualifying payments must be made under the new consolidated loan, not the old loan.

What’s a qualifying payment?

There are several keys to fulfilling the “qualifying payment” step in the requirements for the Public Service Loan Forgiveness program.

1. Payments have to be made after October 1, 2007.
2. Payments must be made under a qualifying repayment program.
3. Each bill must be paid in full as shown on your statement.
4. Payment must be made no more than 15 days after the due date.
5. Payments must be made while working for a qualifying employer.

What’s a qualifying repayment plan?

There are further stipulations on what payment plan qualifies for participation in the Public Service Loan Forgiveness program. It is required for all borrowers to be enrolled in a payment plan that falls under one of the four income-based repayment plans.

How do I apply for the Public Service Loan Forgiveness Program?

In order to apply for the program, you must complete the Employment Certification for Public Service Loan Forgiveness application form during every year of employment or when you switch employers.

Loan Consolidation

If you have been paying several student loan bills every month, you should know that the Direct Consolidation Loan program offers a much easier way to manage your bill. Consolidating your federal student loans offers several benefits under the Direct Consolidation Loan program:

1. Consolidating your federal student loans may be a smart financial move if you are paying two or more loan servicers every month. With a Direct Consolidation Loan, not only can you cut your payments down to one simple payment per month, but your payment may potentially decrease after stretching your repayment period by up to 30 years.
2. If you want to access income-based repayment plans, then participation in the Direct Consolidation Loan may be for you.
3. You can switch from a variable interest rate to a fixed rate loan if your loans were disbursed before July 1, 2006.

You can apply for the Direct Consolidation Loan program through StudentLoans.gov via online application or download and print a paper application to be submitted by mail.

As you continue to pay your federal student loans every month, it’s important to remember that you have a number of resources available to you should you lose your employment, come into economic hardship, or even decide to go back to school.

It’s important to stay in contact with your loan servicer if you foresee any challenges or changes in your life circumstances coming down the pike. It’s always important to have current knowledge of these federal student loan programs and their benefits.