Deferment vs. forbearance: Which is best for your student loan?


If you’re having trouble making student loan payments, you may be able to request student loan deferment or forbearance. Both relief options freeze federal student loan payments up to a specified time frame and can help keep your account in good standing.

The main difference between deferment and forbearance is that interest always accrues when you’re in forbearance, while deferment is interest-free in some cases. Generally, the question of whether to request forbearance versus deferment comes down to which hardship program you qualify for.

What is the difference between deferment and forbearance?

Both deferment and forbearance allow you to postpone federal student loan payments, but they differ in a few key ways.

Student Loan Deferment
Student Loan Forbearance

Eligibility requirements
Tied to a qualifying event and varies based on the type of deferment Borrowers typically don’t have to prove a qualifying event
Availability Your loan servicer must grant deferment if you qualify Your loan servicer can use its discretion to grant general forbearance, but some types of forbearance are mandatory
How to apply
Varies by deferment type Fill out and submit a forbearance request form or request it over the phone through your loan servicer
Interest costs
None on subsidized federal student loans and Perkins loans Interest accrues on all federal student loans and will be added to the loan balance, or “capitalized”
Credit impact
None None
What is student loan forbearance?

Student loan forbearance allows you to pause student loan payments for up to 12 months at a time, with a three-year cap. Interest on your loans will accrue while you’re in forbearance, whether the loans are subsidized or unsubsidized. At the end of forbearance, your loan servicer will add unpaid interest to your principal balance, a practice called “capitalization.” This increases how much you owe, and interest will compound on a larger balance. The only type of loan not subject to capitalization is Perkins loans.

There are two types of forbearance:

General forbearance: This is granted at your loan servicer’s discretion. You may request this type of forbearance if you have financial difficulties, a change in employment, medical expenses or other hardships.
Mandatory forbearance: The loan servicer must grant the forbearance if you are enrolled in a medical or dental internship or residency, serving in the AmeriCorps, eligible for the U.S. Department of Defense Student Loan Repayment Program, paying more than 20 percent of your income toward federal student loans each month or eligible for teacher loan forgiveness.
What is student loan deferment?

Another option is student loan deferment, which also freezes your loan payments. You’ll need to qualify for this type of relief, but it comes with more perks than forbearance. The time frames are longer in some cases, and interest won’t accrue on Direct Subsidized Loans, Subsidized Federal Stafford Loans, Perkins Loans and the subsidized portions of Direct Consolidation Loans and FFEL Consolidation Loans. Interest will accrue on other types of federal student loans in deferment, though.

Deferment is available if you are:

Undergoing cancer treatment.
Living on a monthly income less than 150 percent of your state’s poverty guidelines.
Enrolled at least half time in an undergraduate or graduate degree program.
On active-duty or post-active-duty military service.
A parent who received a Direct PLUS Loan and your child is enrolled at least half time in school.
Enrolled in an approved rehabilitation training program.
Unemployed and unable to find full-time employment.
How to apply for deferment or forbearance

Student loan forbearance and student loan deferment aren’t automatic — borrowers must fill out a form, submit it to their loan servicer and wait for a response. Here’s how to apply for either type of relief:

Contact your loan servicer. Your servicer may provide advice on how to fill out the form and an address for submitting it. If you’re not sure who services your loan, check your latest bill or check the National Student Loan Data System.
Fill out the request form. Head to the Federal Student Aid website to find the correct forbearance request form or deferment request form. The instructions and documentation requirements will vary with each program.
Submit your application. Gather your form and any required documents and submit them to your loan servicer.
Continue making payments. You must continue making payments until your loan servicer confirms that you qualify for the relief program. If you stop making payments, you may be considered delinquent and risk defaulting on the loan. This can impact your credit standing and your loan repayment options.
When to choose deferment vs. forbearance

When choosing between these two options, it’s best to apply for deferment first. You may be able to freeze payments for longer than you would in forbearance, and interest won’t accrue if you have subsidized or Perkins loans. But if you’re in financial trouble and there’s no deferment available for your situation, then apply for forbearance.

But before taking the next steps, make sure that you qualify for deferment or forbearance. You can’t apply for either option if your federal student loans are in default. You also must meet specific requirements for deferment or mandatory forbearance. Check the criteria before pursuing these options.

Alternatives to student loan deferment and forbearance

Student loan forbearance and deferment are temporary solutions that can help you through a short-term hardship. But if you can’t afford your student loan payments in the long term, then you should look for strategies to restructure your budget.

Income-driven repayment

Income-driven repayment plans, such as Pay As You Earn and Revised Pay As You Earn, base your monthly student loan payments on your income and family size. After enrolling in one of these plans, your payments may become more manageable — in some cases, your payment could be as low as $0 per month. Income-driven repayment plans also come with loan forgiveness. If your loan isn’t paid in full after 20 or 25 years, the balance is forgiven.

Student loan refinancing

Another option is refinancing your federal student loans into a private loan. A strong credit history can help you qualify for a lower interest rate, which can lower your monthly payments. However, you give up all of the borrower protections that come with federal student loans, including income-driven repayment plans. Some private student loans come with deferment and forbearance options, but they’re not as generous as what you’d find on federal student loans.

Restructure your budget

Go through your monthly expenses to see if you can get rid of recurring bills to make more room for your student loan payment. Things like rent, utilities, your cellphone plan and groceries are critical. But things like cable bills, streaming services and gym memberships are not. You might also consider making bigger changes, such as moving into a cheaper apartment or getting a part-time job to earn more money.

The bottom line

Student loan deferment and forbearance both allow federal student loan borrowers to hit the pause button on payments. Deferment sometimes offers more perks than forbearance, so check this option first. If there’s no deferment available for your financial situation, then apply for forbearance.

But these are short-term solutions, and you might need to find other ways to make room in your budget for student loan payments.

Featured image by Dragon Images of Shutterstock.

Learn more:
What is student loan deferment?
Should you refinance federal student loans?
How to qualify for student loan forgiveness programs

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