Peace Corps Student Loan Deferments for 2017

It’s not that easy to receive a student loan deferment, especially if you aren’t facing a desperate financial situation, but service in the Peace Corps guarantees you access to a variety of Federal Student Loan Deferment Programs.

Whether you’ve got a National Direct Student Loan (NDSL) or a Federal Direct Loan, you’ll be able to defer your payments for the entire period of your Volunteer service – up to 27 months!

If you’ve got Private Student Loans, you’ll have to speak with your lender to see if you qualify for a deferment, as private lenders are able to establish their own eligibility guidelines.

Principal Deferment

The great news about the Peace Corps loan deferment program is that it applies to virtually every type of Federal student loan program available, including:

  • National Direct Student Loans
  • Federal Direct Loans
  • Federal Consolidation Loans
  • Perkins Loans
  • Stafford Loans
  • Guaranteed Student Loans

And this is an important distinction, because some of the other student loan deferment programs are only available for specific types of loans.

Interest Payments

One of the downsides to some student loan deferment programs is that they don’t cover interest accumulation, meaning that while you won’t have to make principal payments, the interest on your loans will continue to grow, ending up with you owing a larger amount of money once the deferment period ends.

With the Peace Corps deferment program, principal payments are deferred in full for all the eligible loans mentioned above, but you will need to make interest payments on any unsubsidized loans to avoid interest capitalization (the process of adding new interest to your principal balance, making the loan more expensive).

Unsubsidized loans include:

  • Unsubsidized Stafford Loans
  • Federal Consolidation Loans which include unsubsidized loans
  • Unsubsidized Federal Direct Loans

It is possible to request a Federal Student Loan Forbearance on the interest payment for unsubsidized loans, but approval will be contingent on their restrictions and eligibility guidelines, so don’t count on this working out in your favor.

The good news is that the Department of Education pays your interest for you during a deferment period for any subsidized loans, including:

  • Subsidized Stafford Loans
  • Subsidized Federal Consolidation Loans

In addition, the Department of Education does not charge interest during deferment periods for the following types of loans:

  • Perkins Loans
  • Subsidized Federal Direct Loans

So, as long as you’ve got one of the types of loans where your interest payments are covered, or where you won’t be charged interest during a deferment period, then applying for the Peace Corps deferment program is likely to wind up being both a good short-term and long-term move.

Peace Corps Automatic Interest Payments

If you do have an unsubsidized loan, and you want to make monthly interest payments during the deferment period to avoid interest capitalization, then the good news is that you can arrange to have up to $206.25 in funds removed from your readjustment allowance to cover interest payments due on your student loans.

The Peace Corps readjustment allowance is typically used to help Peace Corps volunteers who just finished their service get back on their feet when they return to the States, by finding an apartment, getting new clothing or other supplies, but it can also be used in this way to prevent facing interest capitalization.

If you’re serving in the Peace Corps Response, you won’t be able to take advantage of this benefit, but all other volunteers do have access to it, and should use it if they’re going to face capitalization.

Benefits per Type of Loan

There are different Peace Corps deferment benefits offered for each type of Federally-funded student loan.

Here’s a breakdown of the available opportunities:

Perkins Loans

  • Volunteers can defer Perkins Loans for as long as they remain a Peace Corps volunteer, and up to six months immediately after their service ends. *NOTE: Perkins Loans obtained before July 1, 1993 are only eligible for receiving up to three total years of deferment under this program
  • The Department of Education does not charge interest on Perkins Loans while they’re in deferment

Stafford Loans & Guaranteed Student Loans

  • Volunteers can defer these loans for up to three years while they remain in service with the Peace Corps
  • The Department of Education will pay the interest on subsidized Stafford Loans while they’re in deferment

Federal Direct Loans

  • Volunteers can defer Federal Direct Loans loans for up to three years while they remain in service with the Peace Corps
  • The Department of Education does not charge interest on subsidized Federal Direct Loans while they’re in deferment
  • Volunteers with unsubsidized Federal Direct Loans will need to pay the interest on those loans during Peace Corps service, or apply for Federal student loan forbearance to avoid having that interest capitalized (added to the principal balance of the loan)

Federal Consolidation Loans

  • Volunteers can defer Federal Consolidation Loans for up to three years while they remain in service with the Peace Corps
  • The Department of Education will pay the interest on subsidized Federal Consolidation Loans while they’re in deferment
  • Volunteers with Federal Consolidation Loans that include unsubsidized loans will need to make interest payments while their loans are in deferment, or apply for a deferment or forbearance from their lender

Will a Peace Corps Deferment Actually Help?

The important thing to keep in mind, however, is that deferments are excellent for allowing you time to save up money and get on better financial footing, the money you’re earning while in the Peace Corps probably isn’t going to do much to help you out of a desperate financial situation.

So, while it’s nice that they do offer deferments to Peace Corps volunteers, it’s a bit like slapping a band-aid over a major arterial wound. Sure, it’ll stop the blood loss momentarily, but this is no long-term solution.

Additionally, you’ll have to take all your deferment papers and loan paperwork to staging with you (staging is when you’re being deployed to whatever country you’ll end up serving in), as you won’t be able to get the Peace Corps to verify that you are a Volunteer until after you’ve arrived at staging.

Peace Corps Loan Forgiveness Benefits

In addition to the available deferment benefits, Peace Corps volunteers are considered eligible to take advantage of the Public Service Loan Forgiveness Program since service in the Peace Corps counts as “qualifying employment”.

This program allows those holding student loan debt to apply for comprehensive loan forgiveness, once they’ve satisfied the eligibility conditions of the program.

To get the details about how this works, please visit our page about Peace Corps Student Loan Forgiveness.

Disclaimer:Information obtained from Forget Student Loan Debt is for educational purposes only. You should consult a licensed financial professional before making any financial decisions. This site receives some compensation through affiliate relationships. This site is not endorsed or affiliated with the U.S. Department of Education.


Tim's experience struggling with crushing student loan debt led him to create the website Forget Student Loan Debt in 2011, where he offers advice, tips and tricks for paying off student loans as quickly and affordably as possible.