A short break from school might be just what you need, only without financial consequences. A short break can be defined as taking a semester off and returning the following semester. If you have federal student loans, your time off might be covered by your grace period. However, depending on your circumstances, you might be eligible for a deferment or forbearance, should your student loans go into repayment during your break from school.
As soon as you drop below half-time or leave your school altogether – even for a short time – the grace period on your student loans kick in. Most federal student loans have a maximum grace period of six- to nine-months. Once this period is up, you can find yourself landing in repayment. If this happens, you won't be eligible for another grace period on the same loans, even if you return to school, receive in-school deferment and graduate. However, if you return to school before the grace period expires, you'll receive another grace period the next time you leave school. For some students, taking a semester off will be covered by the grace period.
If your loans do go into repayment during your time away from school, you might be eligible for deferment. During deferment, your monthly loan payments are suspended and you aren't charged interest on federal subsidized loans and federal Perkins loans. While there is no official deferment for students taking a break, you may qualify for other reasons. Deferment may be available to borrowers who are unemployed or unable to find full-time employment, experiencing financial hardship and during or after a period of active military duty. Request a deferment from your lender, the same folks sending you the bill for your student loan. You must be in repayment, not in the grace period, to qualify for a deferment.
If you're unable to make payments on your student loans and don't qualify for deferment, you might qualify for forbearance. You must request forbearance from your lender. If you qualify, you won't be required to make payments for up to 12 months. However, unlike deferment, interest will accrue on your loans during this time. Discretionary forbearance is available for financial hardship or illness. In some cases, your lender is required to grant you forbearance when you meet specified requirements such as serving in medical or dental residency programs, performing student teaching, your loan payment amount would exceed 20 percent of your monthly income or you are a member of the National Guard and activated by a governor.
Communication Is the Key
Communicate with your financial aid office about your planned time off, and how this time off will affect your student loans. Different loans may receive different treatment. It is best to ask a financial aid professional before you leave school about deferment options that might be available to you. You can track the status of your federal student loans by visiting the website of the National Student Loan Data System or checking your credit report for privately held student loans you may owe. If you do have to repay your loans during your break, ask your lender about repayment plans. You may qualify for partial financial-hardship repayment plans such as the income-based repayment or pay-as-you-earn plan and have a monthly repayment amount as low as $0.
Sara Mahuron specializes in adult/higher education, parenting, budget travel and personal finance. She earned an M.S. in adult/organizational learning and leadership, as well as an Ed.S. in educational leadership, both from the University of Idaho. Mahuron also holds a B.S. in psychology and a B.A. in international studies-business and economics.