Student Loan Forbearance vs. Deferment: What’s the Difference?

If you’re having trouble making your student loan payments, you might be able to receive a temporary pause on repayment. However, it’s not as straightforward as you might think. You might need to decide between forbearance and deferment for your student loans. The key difference between the two is that with forbearance your loans will continue to accrue interest, whereas this is less likely to be the case with deferment.

Key Takeaways

  • Forbearance and deferment are options for managing student loan repayments during financial hardship.
  • Federal loan deferment allows borrowers to temporarily postpone payments, with some loans not accruing interest during deferment.
  • Federal loan forbearance also provides temporary payment relief, but interest typically accrues during this period.
  • Exploring alternative options and seeking personalized advice can help you choose the best repayment strategy.

Forbearance vs. Deferment: An Overview

Forbearance and deferment are terms used to differentiate between two types of payment adjustments when you have federal student loans.

It’s important to note that when your loans are in forbearance or deferment, you aren’t making progress toward student loan forgiveness.

The idea is that you might be able to see a pause or a reduction in your student loan payments if you’re struggling to pay the full amount. It’s important to understand the difference between forbearance and deferment for student loans because requirements and terms vary depending on the choice you make.

What Is Loan Deferment?

Federal student loan deferment is usually connected to a specific event. For example, you can usually get a deferment if you are enrolled in school at least part-time, unemployed, or serving in the military.

When you meet the requirements, your student loan servicer must grant you the deferment. Your loans can be deferred for up to three years at a time, with no limits on renewing the deferment as long as you qualify.

Some types of federal student loans don’t accrue interest during forbearance. These include:

  • Direct subsidized loans
  • Direct subsidized consolidation loans
  • Perkins Loans

Other types of student loans, such as direct unsubsidized loans, direct unsubsidized consolidation loans, and PLUS loans all accrue interest during the deferment.

At the end of the deferment period, unpaid interest is capitalized, or added to the loan balance.

Applying for Student Loan Deferment

For the most part, student loan deferment is based on an event that qualifies you to receive a break in student loan payments. Some of the reasons for deferment include:

  • Attending college or graduate school at least part-time
  • Enrolling in a graduate fellowship program
  • Having a parent PLUS loan for a student enrolled in school at least part-time
  • Being in the military, performing qualifying service
  • Undergoing treatment for cancer
  • Experiencing unemployment

When enrolled in college or graduate school, you should receive deferment automatically. Other deferments, however, require an application. You’ll have to call your federal loan servicer or visit its website to get the application and apply based on the qualifying event. In some cases, you may need to provide documentation of the qualifying event. You can find your servicer by logging into your Federal Student Aid account.

What Is Loan Forbearance?

Federal student loan forbearance is also a way to handle student loan payments when you’re struggling. Forbearance can be granted in terms of up to 12 months. You can apply for another forbearance if you’re still experiencing hardship after the original term ends.

With student loan forbearance, interest accrues on all types of loans. Additionally, forbearance is more discretionary. Your loan servicer might reduce your payments rather than suspend them. Additionally, interest isn’t capitalized at the end of your term.

Applying for Student Loan Forbearance

You’re likely to receive forbearance if you meet some of the following criteria:

  • You’re experiencing financial hardship related to a number of possible factors, such as a change in living situation, reduction in income, or high medical costs
  • Your income is low relative to your student loan payments
  • You’re in medical or dental residency or internship
  • You’re on track for partial loan forgiveness through the Defense Department
  • You’re in the National Guard
  • You’re on track for Teacher Loan Forgiveness

To receive forbearance, you need to apply through your servicer. Unlike deferment, where you need to select the right application paperwork for your situation, there’s only one application for forbearance.

While most forbearance is at the servicer’s discretion, there are some instances when a servicer is obligated to grant your request. This includes participation in the AmeriCorps, a medical internship, the National Guard, and a few other situations.

You might need to provide documentation of your situation. Call your loan servicer or visit its website for more information. In some cases, your servicer can set up your forbearance over the phone.

Key Differences 

The main difference between deferment and forbearance is the accrual of interest. On certain loans, deferral won’t result in interest accrual. With forbearance, however, all loans continue to accrue interest during the period that you’re making reduced payments or skipping them.

Another key difference is that when you meet the requirements for deferral, your federal loan servicer must grant your request. With forbearance, the servicer has more discretion when granting your request.

Neither forbearance nor deferment on your federal student loans will directly impact your credit.

Deferment Forbearance
Time Period Up to three years, depending on the type of deferment, although you might be able to defer as long as you qualify. Up to 12 months at a time, although you can reapply for forbearance when the original term ends.
Criteria A specific event is required to receive a deferment. No specific qualifying event is required.
Application Requirements You must choose the correct deferment type and form. Documentation is usually required, although school enrollment typically results in automatic deferment. Only one form is provided for forbearance, and you might be required to provide documentation. Forbearance can be granted over the phone.
Servicer Discretion If you meet the requirements, the servicer must grant your request. Most types of forbearance are up to servicer discretion, although some types are mandatory.
Interest Accrual Subsidized and Perkins loans don’t accrue interest during deferral, although other types of loans do. All types of loans accrue interest during the forbearance period.
Credit Impact No direct impact. No direct impact.

Should You Choose Deferment or Forbearance?

In many cases, if you have a long-term financial situation that meets the criteria for deferment for your student loan, it might make sense to go forward. This is especially true if you have subsidized or Perkins loans. If you can avoid interest accrual during your deferment, you won’t have to worry about the additional cost of adding interest to your loan balance at the end of your deferment.

On the other hand, if you think your financial hardship is likely to be relatively brief, forbearance might make more sense. This is especially true if you know your interest will accrue regardless.

It might be a good idea to set up a plan to at least pay the interest on your student loans during forbearance or deferment so that you can minimize the long-term impact of reducing or delaying your student loan payments.

Alternatives to Deferment and Forbearance

You don’t always have to make the choice between forbearance and deferment for your student loans. You can turn to another option, such as:

Income-Driven Repayment (IDR) Plans

Rather than using deferment or forbearance and potentially needing to catch up later, you can take advantage of an income-driven repayment (IDR) plan. If you qualify, you might be able to get a payment as low as $0 per month—without the need for forbearance or deferment.

Additionally, if you qualify for the Saving on a Valuable Education (SAVE) Plan, your loan won’t accrue interest as long as you remain up-to-date on your payments.

There are different IDR programs, each with specific term lengths. Additionally, once you start earning more money, you might no longer qualify. You must update your income and renew your IDR plan each year.

Student Loan Consolidation

If you’re making several different payments on the Standard Repayment Plan, it can feel overwhelming. Instead of getting deferment or forbearance for each loan, consider consolidating your loans. With a federal direct consolidation loan, everything is put under one loan with one payment. Often, the term is spread out for a longer period of time, so your monthly payments are more manageable.

Student Loan Forgiveness Programs

Check to see if you qualify for any student loan forgiveness programs. If you can get a portion—or all—of your loan balance canceled for service as a teacher, healthcare provider, or nonprofit worker, this can reduce your need for forbearance or deferment.

Enrolling in an IDR plan can help you reduce your payments while setting you up for cancelation after you meet the Public Service Loan Forgiveness (PSLF) requirements.

Student Loan Refinancing

It’s also possible to refinance your loans privately. If you have good credit, you might be able to get a competitive rate and reduce your payments and loan term.

However, it’s important to note that if you refinance your federal student loans, you’ll no longer be eligible for programs like income-driven repayment, federal deferment and forbearance, PSLF, and other federal debt cancelation programs.

Budget Restructuring

Finally, if you don’t want to defer your loans or apply for forbearance, you can review your budget and make changes. See if you can cut back on unnecessary expenses and direct more money toward student loan payments. You can also look for ways to increase your income to make repayment more affordable.

Do Private Student Loans Offer Deferment and Forbearance?

Private student loans might offer hardship programs, which they may call either deferment or forbearance. However, each program is different and you should talk to your lender about the requirements.

Is It a Good Idea to Pay Student Loans During Deferment or Forbearance?

It might make sense to at least pay the interest on your loans during deferment or forbearance. If you don’t pay your interest during deferment, accrued interest will be capitalized. With forbearance, your interest isn’t capitalized, but you still have to begin paying accrued interest after the forbearance period ends.

Is Forbearance a Good Idea if I Don’t Know When I Can Start Paying?

Both deferment and forbearance can be tools that can help you get your budget under control if you’re struggling to make your student loan payments. However, before you settle on deferment or forbearance, consider applying for an IDR plan, which can also lower your payments while still allowing you to work toward forgiveness.

The Bottom Line

If you’re struggling with your student loan payments, you will likely need to use multiple strategies to manage your situation. Both deferment and forbearance can help provide you with breathing room to make a plan. However, you should consider all of your options before moving forward, including consulting with a financial professional who can help you review your situation and make a plan.

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