Deferment vs. Forbearance: How to Decide Which Can Help With Student Loans

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Are you struggling to pay your student loans? You may have heard of deferment and forbearance.

Those are two temporary options for reducing or postponing payments on federal student loans for a period of time, typically due to a financial hardship. 

The emphasis here is temporary. Neither program will reduce the total amount you owe on your student loans, and they may end up costing you a lot more in interest.

But if you’re experiencing a qualifying economic hardship (more on that later), these options could be a lifeline when you can’t pay your student loans. 

Let’s compare deferment and forbearance to see which could work best for you.

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Deferment vs. Forbearance for Student Loan Payments

So you may be wondering: If deferment and forbearance won’t save you money or let you off the hook for the full amount, why should you bother requesting them? Should you simply stop paying instead?

You should ask about them because both options can help you avoid defaulting on your federal loans — that happens when you’ve missed payments for 270 days (or about nine months). Defaulting on your loans can wreak havoc on both your credit score and bank account.

Unfortunately, it’s a common situation: More than 350,000 borrowers had loans that entered default in the third quarter of 2019, according to the National Student Loan Data System. If you default on your loans, the government can collect on the debt by garnishing your wages or income tax return refunds.

Pro Tip

You can’t qualify for forbearance or deferment if your loans are already in default — you’d need to rehabilitate your student loans before you could be eligible again.

Having a default on your credit report will also tank your credit score and make you ineligible for additional federal student aid. That black mark can even affect your ability to get an apartment and, in some cases, a job.

But qualifying for a deferment or forbearance before defaulting can provide you the relief from the payments — and neither will affect your credit score.

Ready to find out if one is right for you? 

Student Loan Deferment

If you qualify for a deferment, you typically do not pay the interest that accrues on subsidized or Perkins loans, but you will still accrue interest on Plus loans and any unsubsidized loans — including the unsubsidized portion of a consolidation loan.

How to Qualify

You may qualify for deferment under the following circumstances:

  1. You’re enrolled (or you’re a parent with Plus loans who has a student enrolled) at least half-time in an eligible college or career program or you’re enrolled in an approved graduate fellowship program.

  2. You’re receiving cancer treatment (and for six months after).

  3. You’re enrolled in an approved rehabilitation training program for the disabled.

  4. You’re unemployed or unable to find full-time employment (for up to three years).

  5. You’re serving in the Peace Corps (for up to three years).

  6. You’re on active duty military service involved in a war, military operation or national emergency (and for 13 months after).

How to Apply

If you’re enrolled in a college or career program, your loan will be placed in a deferment automatically — if it isn’t, contact your school. 

For all other deferments, you’ll need to submit a request and documentation to your loan servicer.

Student Loan Forbearance

During a forbearance period, you may not have to make your monthly student loan payments; however, interest continues to accrue on the loan during that time.

There are two types of forbearance: Mandatory and general.

Mandatory Forbearance

A mandatory forbearance means that your loan holder must grant you a forbearance if you qualify and supply supporting documentation. Mandatory forbearance is only available for direct loans and Federal Family Education Loans (FFEL) except in the case of income-based forbearance, which also includes Perkins loans. 

You may qualify for mandatory forbearance under the following circumstances:

  1. You have a medical or dental internship or are in a residency program.

  2. Your monthly student loan payment is 20% or more of your monthly gross income.

  3. You’re serving in an AmeriCorps position.

  4. Your current job qualifies you for Teacher Loan Forgiveness.

  5. You qualify for partial repayment of your loans within the U.S. Department of Defense Student Loan Repayment Program.

  6. You are a member of the National Guard who’s been activated.

General Forbearance

General forbearance (aka discretionary forbearance) means your lender has the option to decide whether you qualify. It’s available for Direct, FFEL and Perkins loans.

You can request a general forbearance for the following reasons, among others your lender may accept (you’ll have room to explain your situation on the form):

  1. Financial difficulties

  2. Medical expenses

  3. Change in employment

How to Apply

To request a forbearance, submit an application and documentation to your loan servicer — even if it’s for a mandatory forbearance. 

The forbearance period can last for a maximum of 12 months, but you can request another forbearance if you still meet the economic hardship eligibility requirements. The total number of forbearances you can receive depends on the forbearance and loan type.

Comparing Deferment vs. Forbearance

Deferment is the better option of the two if you have subsidized or Perkins loans, since they won’t accrue interest during deferment. 

How much can it save you? If you have a $30,000 federal loan at 6% interest, with a $333 monthly payment, here’s the difference:

  Outstanding Principal After One Year New Monthly Payment Total Repaid Over the Life of the 10-Year Loan
Subsidized or Perkins loan in deferment $30,000 $333 $41,767
Any federal student loan in forbearance (during which your interest is accrued quarterly and the interest capitalizes at the end) $31,841 $354 $42,420

One year of deferment instead of forbearance could save you $653.

Alternatives to Deferment and Forbearance

Here’s the cold, hard truth: If there’s any way to avoid deferment or forbearance — whether it’s by tightening your budget or picking up a side gig, for instance — do that first. By finding ways to make your student loan payments, you’ll finish paying them off that much sooner and pay less in interest in almost every scenario.

Pro Tip

Even after you request forbearance or deferment, continue making the payments on your federal loans until you receive approval — otherwise, your loans will become delinquent and go into default.

If you don’t foresee ever being able to afford the monthly payments on your student loans or the financial hardship you face is a longer-term problem, deferment and forbearance may not be right for you. 

At that point, your best option may be to enroll in an income-driven repayment plan, which can offer lower payments long-term as well as loan forgiveness at the end of the repayment period.

If you have multiple loans and making all the payments is unmanageable, consider a loan consolidation.

Deferment and Forbearance for Private Student Loans?

If you have private student loans, you’ll need to contact your loan servicer directly for options. Start by determining who you owe and how much you owe in student loans

Once you have a list of your private loan servicers, call them to ask about possible payment extensions or even deferment or forbearance options they may offer (they aren’t required to offer them, but they may). 

You’ll want to prepare any documentation before you get on the call — have your loan numbers, pertinent dates and a clear, simple explanation why you currently cannot make a payment as well as when you will be able to start paying. This last piece of information is essential, as a private lender’s willingness to offer options will likely depend on whether you can assure them the situation is temporary.

Alternatively, if your interest rates on private loans are astronomical, you can also consider refinancing to make your payments more manageable.

Tiffany Wendeln Connors is a staff writer/editor at The Penny Hoarder. Read her bio and other work here, then catch her on Twitter @TiffanyWendeln.