Should I delay repaying my student loans—either through deferment or forbearance—while I serve in the military, volunteer in the Peace Corps, or participate in a national service program?

If you’re short on cash, deferment or forbearance can be a short-term fix, but it could also make paying back your loans more expensive. Either of these can provide a respite from otherwise permissible judicial and functional collection efforts by your servicer for some period of time. Forbearance pauses payments and gives you a window to get back on your feet if you're struggling. Sometimes lenders agree to reduce your debt permanently as part of a forbearance. You are still responsible for the interest accrued during a forbearance.

Deferment postpones your payments but doesn't change the terms of your loan. This means that short-term, your payments are paused, but long-term, the cost of your debt probably increases. You do not have to pay interest on the loan during deferment if you have a subsidized loan. If you have an unsubsidized loan, you’re still responsible for the interest during deferment.

The difference between deferment and forbearance has to do with the amount of interest accrued over time. During a deferment, interest doesn’t accrue on some types of loans. During a forbearance, interest accrues on all loan types.

If you do decide to pursue deferment or forbearance, it’s important to understand how this affects your ability to receive credit for public service loan forgiveness (PSLF).

Income-driven repayment plans are the best option for most borrowers

If you have federal Direct Loans, an income-driven repayment (IDR) plan, like Income-Based Repayment (IBR), Income-Contingent Repayment (ICR), Pay As You Earn (PAYE), or Saving on a Valuable Education (SAVE), can be the best plan for most people working in public service. Your monthly payment may be as low as $0 per month, there may be interest benefits that prevent your balance from growing due to unpaid interest, and you’ll make progress toward loan forgiveness each month that you’re enrolled.

Servicemembers, Peace Corps volunteers, and other public servants may qualify for benefits that lower or cancel their student loans

Servicemembers may 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. Contact your student loan servicer to learn more about benefits for borrowers engaged in public service.

Private student loan payment options for servicemembers and Peace Corps volunteers

Private student loans may also offer deferment or forbearance for borrowers under certain circumstances. Unlike some federal student loans, you are generally still responsible for the interest that accrues during a deferment or forbearance. Many borrowers are surprised to discover that their student loan debt has grown once they finish their service and begin to repay their loans. Contact your student loan servicer to learn more about your options before you decide to postpone making payments on your student loans. You can ask your servicer directly about all the benefits available to borrowers working in public service.

If you have a problem with a student loan, you can submit a complaint to the CFPB online or by calling (855) 411-CFPB (2372).