You can pause federal student loan payments while you’re enrolled at least half-time in graduate school through an in-school deferment, and for most borrowers the servicer sets it up automatically once the school reports enrollment. Deferring student loans in grad school stops the monthly bill, but it does not stop interest from accruing on the loans grad students actually carry — Direct Unsubsidized Loans and Grad PLUS Loans. Understanding what deferment costs you, and when a different option would serve you better, matters more than the paperwork.
Which Loans You Can Defer
Direct Unsubsidized Loans and Direct PLUS Loans (Grad PLUS) both qualify for in-school deferment.1Federal Student Aid. In-School Deferment Request Form Any Direct Subsidized Loans left over from your undergraduate years qualify too, as do Direct Consolidation Loans, with interest handled separately for the subsidized and unsubsidized portions.2MOHELA – Federal Student Aid. Repayment Options
Private student loans sit outside the federal deferment rules. Some private lenders offer their own in-school forbearance, but the terms come from your loan contract, not federal law. Check with the lender directly.
To qualify on the federal side, you have to be enrolled at least half-time at a school approved for federal student aid.1Federal Student Aid. In-School Deferment Request Form “Half-time” isn’t a single federal credit-hour number. Your school’s registrar defines it, and the threshold can vary between programs at the same institution. If you drop below half-time at any point during the term, the deferment ends.
How the Deferment Gets Started
Most graduate students never file a form. Schools report enrollment through the National Student Clearinghouse to the National Student Loan Data System, and that data flows to your loan servicer.3National Student Clearinghouse. Compliance Once the servicer sees you’re enrolled at least half-time, it places your loans into in-school deferment on its own. Grad PLUS Loans are handled the same way, based on the enrollment data the school reports.4FSA Partner Connect. In-School Deferments for Graduate/Professional Student Direct PLUS Loan Borrowers
Check your loan status on StudentAid.gov a few weeks after classes start. If the deferment hasn’t posted, call your school’s registrar or financial aid office and ask them to confirm enrollment has been reported.5Federal Student Aid. Student Loan Deferment
If automatic reporting doesn’t do the job, file the In-School Deferment Request form (OMB No. 1845-0011) with your servicer.6Federal Student Aid. In-School Deferment Request Log into StudentAid.gov first to identify which company services your loans. The form requires an authorized school official — usually the registrar — to certify your enrollment status and dates. Submit it through your servicer’s online portal or by mail.
Keep making your scheduled payments until you get written confirmation the deferment is in effect.5Federal Student Aid. Student Loan Deferment Stopping payments before approval risks delinquency, and federal servicers report 90-day delinquencies to the credit bureaus, where they can stay on your report for seven years.7MOHELA – Federal Student Aid. Credit Reporting
What Deferment Actually Costs You
Deferment pauses the payment. It does not pause interest on unsubsidized debt, and that’s essentially all grad school debt. Direct Unsubsidized Loans, Grad PLUS Loans, and the unsubsidized share of a Consolidation Loan keep accruing interest the entire time you’re in school.2MOHELA – Federal Student Aid. Repayment Options Graduate students have not been eligible for new Direct Subsidized Loans since July 1, 2012.
If you don’t pay the interest as it accrues, it capitalizes when the deferment ends. That means the unpaid interest gets folded into your principal, and you start paying interest on interest.8Nelnet – Federal Student Aid. Interest Capitalization
The math is easy to underestimate. On a $30,000 unsubsidized balance at 7%, roughly $175 in interest accrues each month. Across a two-year master’s program, that’s more than $4,000 added to your principal, and you’ll pay interest on that inflated balance for the remaining life of the loan.
You can make interest-only payments during deferment without losing the deferred status. Paying even part of the monthly interest limits how much capitalizes when you return to repayment.
Any Direct Subsidized Loans you’re carrying from undergrad work differently: the government pays the interest on those during deferment, so the balance holds steady.9Federal Student Aid. Deferment
When You Shouldn’t Defer
Deferment is the wrong move for two groups of graduate borrowers.
Borrowers Who Would Owe $0 on an Income-Driven Plan
Income-driven repayment plans set your monthly payment based on income and family size, and a full-time grad student with little income often calculates out to $0. The critical difference from deferment: months on an income-driven plan count toward the plan’s 20- or 25-year forgiveness timeline, even when the payment is $0. Under the Income-Based Repayment plan, borrowers who first took out loans after July 1, 2014, pay 10% of discretionary income with forgiveness after 20 years; earlier borrowers pay 15% with forgiveness after 25 years.10Federal Student Aid. Income-Driven Repayment Plans Months in deferment count toward neither.
Applying goes faster if you let the Department of Education pull your tax information directly from the IRS, which also sets up automatic annual recertification.
Borrowers Working Toward PSLF
Many grad students keep working — for a school district, a government agency, a nonprofit — while attending part-time. If you’re pursuing Public Service Loan Forgiveness, deferring your loans stops your progress. Months in deferment do not count toward the 120 qualifying payments PSLF requires.11MOHELA – Federal Student Aid. Borrower In School
Ask your servicer to waive the in-school deferment and put you on an income-driven plan instead. A qualifying $0 payment still counts as one of the 120.
If you’ve already spent months in deferment and want that time back, PSLF’s buyback provision may help. You can purchase credit for months in deferment or forbearance, but only if you already have 120 months of qualifying employment and the buyback would trigger forgiveness immediately under PSLF or Temporary Expanded PSLF.12MOHELA – Federal Student Aid. PSLF Information
What Happens When You Leave Graduate School
Deferment ends when you graduate, withdraw, or drop below half-time enrollment. For Direct Subsidized and Unsubsidized Loans, you generally get a six-month grace period before payments start. Grad PLUS borrowers whose loans were first disbursed on or after July 1, 2008, receive an additional six-month post-enrollment deferment that works similarly.1Federal Student Aid. In-School Deferment Request Form
One catch: for Direct Loans and Stafford Loans, you generally get only one grace period per loan. If a loan’s grace period was fully used up after you finished undergrad, that same loan may not get another one after grad school and could go straight into repayment. Any new loans you took out during the graduate program will have their own grace period.
Use the transition to pick a repayment plan and set up autopay, which many servicers reward with a small interest rate reduction.
If the Servicer Won’t Process It
When automatic reporting fails or your servicer sits on a manual request, work the problem in order. Call the servicer’s main customer service line, ask about the status, and request written confirmation that the request is being processed.13Federal Student Aid. Federal Student Loan Issue Self-Resolution Checklist Keep paying until the deferment is confirmed.
If that call doesn’t fix it, ask for the escalated issues department or internal ombudsman. If the problem still doesn’t move, file a complaint with the Federal Student Aid Ombudsman through the online assistance request on StudentAid.gov.13Federal Student Aid. Federal Student Loan Issue Self-Resolution Checklist The Ombudsman is a neutral office that can step in when a servicer fails to process a valid deferment.