How To Get Student Loan Unemployment Deferment

Losing your job can make it difficult to keep up with your financial obligations, including student loan payments. In January 2025, about 6.8 million Americans were unemployed and looking for work, according to the U.S. Bureau of Labor Statistics.

If you're facing unemployment, federal student loan unemployment deferment can provide temporary relief. Here's how unemployment deferment works, how to apply, and alternatives to consider if you don't qualify.

What is student loan unemployment deferment?

Unemployment deferment lets you temporarily pause your federal student loan payments for as long as 36 months if you're out of work. This option can help you avoid default while giving you financial breathing room.

Unemployment deferment is different from forbearance, which lets you pause payments under different circumstances. Another key difference is how interest accrues. During deferment, interest doesn't accrue on subsidized federal loans, but it continues to accumulate on unsubsidized loans.

“Common options for deferment include in-school deferment and grace periods but, depending on the lender, could include unemployment, full-time military service, cancer treatment, or volunteering with the Peace Corps,” says Bethany Hubert, a financial aid specialist with Going Merry by Earnest.

Current student loan refinance rates

Who qualifies for unemployment deferment?

To qualify for unemployment deferment, you must be a federal loan borrower who is either receiving unemployment benefits or seeking and unable to find full-time employment.

You're not eligible if you've turned down offers for full-time employment, even if you were overqualified for the job, or haven't made at least six diligent attempts to find full-time work within the past six months.

While some private lenders may allow you to defer payments due to unemployment, it depends on the lender's policies. You'll need to check with your lender to see if this option is available. Keep in mind that private lenders typically offer shorter deferment periods than you get for federal loans, and eligibility requirements vary.

“On the positive side, some private lenders offer job hunting and resume writing help to borrowers,” says Jack Wang, a wealth adviser and financial aid expert at Innovative Advisory Group.

How to apply for unemployment deferment

To apply for federal student loan unemployment deferment, you'll have to complete the Unemployment Deferment Request form provided by the Department of Education. You'll provide information about yourself and answer questions about your employment status to determine if you're eligible.

If you qualify for unemployment deferment, you may qualify for up to three years of relief before resuming repayment.

“If you're worried about falling behind on your payments while you're unemployed, take a proactive approach,” says Hubert. “Deferments aren't automatic — you'll need to talk with your lender about your financial situation to see what options you qualify for.”

Does interest accrue during unemployment deferment?

Interest may accrue on your loans during unemployment deferment, depending on the type of loans you have. Interest will not accrue on the following loans:

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

Interest will accrue on all other federal loans, including Direct Unsubsidized Loans. If interest accrues on your loan, you have three options: pay the interest as it accrues, pay it in a lump sum before your deferment period ends, or allow the interest to be capitalized on your loan at the end of the deferment.

“When interest is capitalized, new interest will be charged on the capitalized interest in addition to the loan principal, causing interest to be charged on interest, a form of compounding,” says Mark Kantrowitz, a financial aid expert and author of “How To Appeal for More College Financial Aid.” “This causes the total loan payments to increase if the interest is not paid before it is capitalized.”

Alternatives to unemployment deferment

If you're not eligible for unemployment deferment or would rather avoid it, several other options are available.

Student loan forbearance

Federal student loan forbearance is an option if you don't qualify for unemployment deferment or have exhausted the three-year maximum deferment period. General forbearance has more flexible eligibility requirements. You can use it for any financial difficulties or changes in employment, even if you don't meet the strict requirements for deferment.

However, interest will accrue on all loans while they're in forbearance. Pushing off loan payments for as long as possible isn't necessarily in your best interest.

“Student loan deferment provides financial relief for a short-term financial difficulty. It is not a long-term solution,” Kantrowitz explains. “A deferment or forbearance may just be digging the borrower into a deeper hole because the accrued but unpaid interest will increase the amount of debt,” he adds.

Income-driven repayment plans

The Department of Education offers several income-driven repayment (IDR) plans for federal loans. Under these plans, your monthly payments are based on a percentage of your discretionary income. If you've lost your job and have no income, you may not have to make any monthly payments at all.

“Note that IDRs are based on the income from the most recently completed tax return,” says Wang. However, “if your income is now lower due to job loss, you can apply for alternative documentation of income so your IDR payment can be based on your current income, not what it was on your tax return,” he explains.

This type of repayment plan could also be a good option if you have a job, but your income isn't currently enough to cover your payments under the Standard Repayment Plan.

Student loan refinancing

If you have private student loans, refinancing could help you lower your interest rate or monthly payment. Private loan refinancing involves replacing one or more existing loans with a new loan from a private lender, ideally at a better rate or with more favorable terms.

This option can be especially helpful if you have good credit or a cosigner with reliable income, as you may qualify for a lower interest rate. Lowering your rate can save you money over the life of the loan and make payments more manageable during periods of unemployment.

However, refinancing is typically more difficult to qualify for if you're unemployed, as lenders require proof of income. If you're considering refinancing, make sure you have another source of income or a cosigner who can help you qualify.

Finally, if you have federal loans, refinancing likely isn't in your best interests. If you refinance your federal loan into a private one, you lose out on many of the benefits that come with federal loans, including loan deferment, forbearance, and access to income-driven repayment.

Federal loan consolidation

If you have federal student loans, consolidating them into one Direct Consolidation Loan can simplify your payments and help you manage your debt during unemployment. This can make it easier to keep track of your payments and avoid default.

While consolidation won't lower your interest rate, it can potentially extend your repayment term as long as 30 years, which would reduce your monthly payment amount. Remember that extending your repayment term means you'll pay more in interest over the life of the loan. However, this option lets you stay current on your loans even with a reduced income.