Federal student loan borrowers have long relied on deferment programs to pause payments during tough times, such as unemployment or financial hardship. But new proposals in Congress could strip those options away.
According to CNBC, House and Senate Republicans are pushing to end unemployment and economic hardship deferments. These programs allow eligible borrowers to pause payments for up to three years without interest accruing on subsidized loans.
How deferments work — and who qualifies
As the National Consumer Law Center explains, unemployment deferment is typically available to those seeking but unable to secure full-time work or who qualify for unemployment benefits.
Economic hardship deferment is often granted to borrowers earning below a certain threshold, receiving public assistance, or serving in the Peace Corps.
Currently, these deferments are a critical part of the federal loan system. That protection could disappear for loans taken out after July 2025 (House bill) or July 2026 (Senate version), CNBC reports — meaning new borrowers would no longer qualify, though existing borrowers would still retain access to unemployment and economic hardship deferments under current rules.
Rising risks if programs vanish
If these options are eliminated, more borrowers may fall into forbearance, where interest continues to grow, or worse, default on their loans. CNBC cites experts who warn that financial shocks like job loss or unexpected medical bills could push millions into delinquency without deferments.
Abby Shafroth of the National Consumer Law Center told CNBC that default rates could rise, especially among vulnerable borrowers. A Department of Education report cited by CNBC warns that defaults may double from over 5 million to nearly 10 million in the coming months.
Taxpayer arguments and political goals
Supporters of the GOP bill, including Sen. Bill Cassidy (R-La.), argue that ending these deferments would reduce the financial burden on taxpayers who didn’t attend college. Cassidy told CNBC the legislation could save $300 billion by shifting more responsibility to borrowers.
The bill is part of a broader package dubbed the “One Big Beautiful Bill Act,” with provisions affecting repayment plans, deferment rules, and minimum payments.
Planning ahead as policies shift
While the future of deferments remains uncertain, experts suggest borrowers focus on preparation.
CNBC notes that income-driven repayment plans may still offer relief, with payments potentially as low as $0 during periods of unemployment. Borrowers should contact their loan servicers now to explore their options and keep documentation of all communications.
Emergency savings can also serve as a buffer during joblessness or illness. And while private refinancing might lower monthly costs, it comes with a tradeoff: the loss of federal protections.
Be ready, not reactive
Student loan policies are shifting fast.
Staying informed, reviewing current repayment options, and preparing for potential changes can help borrowers avoid costly surprises down the line.
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