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Student Loan Forbearance vs Deferment

Student Loan Forbearance vs Deferment
Chris Alexis
Chris AlexisUpdated August 3, 2023
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If you anticipate having trouble repaying your student loans, forbearance and deferment are two options that could help. Each allows you to temporarily stop paying your student loans. But which one is better for you?The U.S. Department of Education's COVID-19 relief for student loans is ending in 2023. Student loan interest will resume starting on Sept. 1, 2023, and payments will be due starting in OctoberThis is a good time to make the important decision about student loan forbearance vs. deferment. You’ll want to weigh the pros and cons of each option in order to make the best choice for your situation.Read on to learn more.

What Is Student Loan Forbearance?

Student loan forbearance allows you to temporarily reduce or pause your student loan payments. It does not erase your loan debt. Instead, it gives you time to help get your financial situation on track so you may better prepare to resume payments.Be aware that student loans do accrue interest while in forbearance. However, because of a new change scheduled to go into effect on July 1, 2023, interest will no longer capitalize. This means unpaid interest will not be added to your principal balance the way it once was. There are different types of forbearance, and generally, you need to request them from your student loan servicer.

How Does Student Loan Forbearance Work?

As you consider forbearance vs deferment for student loans, it’s critical to know how each works. Forbearance typically falls into one of two categories: general forbearance and mandatory forbearance.You can apply to the Federal Student Aid office for general forbearance if you have federal Direct Loans, Federal Family Education (FFEL) Program loans, and Perkins Loans. You may need to provide proof of why you can’t make your student loan payments, whether it’s due to job loss or medical expenses, for instance. This type of forbearance is granted for no more than one year at a time. After that, if you are still struggling financially, you can seek another forbearance. Be aware that there is a maximum of three years of general forbearance.You can also request mandatory forbearance. As long as you are eligible, your loan server must grant it. You can ask for mandatory forbearance if one of the following situations applies to you:  
  •   You’re currently serving in AmeriCorps and you received a national service award.
  •    Under the U.S. Department of Defense Student Loan Repayment Program, you may be eligible for partial repayment of your loans.
  • You’re serving in a medical or dental internship/residency program and meet certain requirements.
  • You’ve been activated as a member of the National Guard by a governor, but you’re not eligible for a military deferment.
  • If the total amount you owe each month for all your federal student loans is 20% or more of your total monthly gross income, you can pursue a Student Loan Debt Burden forbearance.
  • You’re performing a qualifying teaching service, which makes you eligible for Teacher Loan Forgiveness forbearance.
While in forbearance, you have two options:
  1. Pay the interest on your loans as it accrues.
  2. Allow the interest to accrue. But remember, as of July 1, 2023, interest will no longer be capitalized and added to your loan principal balance at the end of the forbearance period. 

Pros and Cons of Student Loan Forbearance

Before you decide to seek a forbearance, it’s wise to weigh the pros and cons. Keep the following in mind when thinking about student loan forbearance vs. deferment.
Could prevent late fees due to missed payments and the risk of going into student loan default. Interest will accrue. (Starting in July 2023, interest will no longer be capitalized.)
Forbearance won’t impact your credit.  Forbearance typically does not count toward the requirements needed for federal student loan forgiveness.
May give you some relief while grappling with financial issues. It’s a short-term solution.
Recommended: Guide to Student Loan Forgiveness

What Is Student Loan Deferment?

To understand the differences between forbearance vs deferment of student loans, let’s look at what student loan deferment involves.Deferment also allows you to temporarily postpone or reduce your student loan repayments. However, with deferment, interest generally does not accrue on certain types of federal student loans. 

How Does Student Loan Deferment Work?

If you’re enrolled in college at least half time, and you have Direct Subsidized Loans, Direct Unsubsidized Loans, or grad PLUS Loans, those loans will automatically be placed in deferment while you’re attending school and for six months after school.This is called in-school deferment. If you have private student loans, some private lenders may also offer this type of deferment. To see if yours does, reach out to your loan servicer.You may also qualify for deferment if you meet certain criteria, including:
  •   If you are a parent with Parent PLUS loans and your child is in college, you can request in-school parent deferment. This deferment will typically last as long as your child is in school and for six months after graduation.
  • If you’re having difficulty landing a job or receiving unemployment benefits, you might be eligible for unemployment deferment, which can last for up to three years.
  • If you’re employed, but make less than 150% of the poverty guideline for your state and family size, you may qualify for an economic hardship deferment for up to three years.
  • You can also apply for an economic hardship deferment if you serve in the Peace Corps.
  • If you’re on active duty in the military, you could be eligible for a deferment for the duration of your service and 13 months afterward.
  • If you’re battling cancer, you can apply to defer loans while undergoing treatment plus an additional six months.
  • If you’re in a qualified training program and providing treatment for vocational, drug abuse, mental health, or alcohol abuse, you may be eligible for deferment.  
During deferment, interest will stop accruing on Direct Subsidized Loans and Perkins loans. But other loans, including Direct Unsubsidized Loans and private student loans, will continue accruing interest.

Pros and Cons of Student Loan Deferment

Be sure to consider the pros and cons of deferment before choosing a deferment vs. forbearance of student loans. 
Allows you to temporarily suspend or decrease monthly student loan payments.Interest continues to accrue on some types of student loans. This may significantly increase the total amount to be repaid.
Deferment may last up to three years for those who qualify.May end up costing you more over time than some other methods, such as income-driven repayment. (See below for additional details.)

Difference Between Student Loan Forbearance vs Deferment

The difference between forbearance vs. deferment of student loans is that with deferment, interest does not accrue if you have one of the following: 
  • Direct Subsidized Loans
  • Subsidized Federal Stafford Loans
  • Perkins Loans
  • Subsidized parts of Direct Consolidation Loans or Federal Family Education Loan (FFEL) Program Consolidation Loans
With forbearance, the interest on student loans does accrue, and you need to pay it, no matter the type of loan you have. 

Is Student Loan Deferment or Forbearance Better?

Student loan deferment could make sense for you if you have federal subsidized loans or Perkins Loans, since the interest will not accrue on these loans. Deferment might also be worth considering if you are facing financial hardship due to circumstances such as unemployment. But you will need to qualify for deferment, as noted above.If you don’t qualify for deferment, forbearance may be an option to explore.

Deciding Which Plan Is Right for You

If you believe you qualify for deferment, and you have the types of student loans that won’t accrue interest, you may want to apply for deferment. If you don’t qualify for deferment, you might want to pursue forbearance instead. But there are other options to consider for help with repaying your student loans.  For instance, an income-driven repayment (IDR) plan could reduce your monthly loan payments. There are four different types of IDR plans, and they take your income and family size into consideration. Generally, an IDR plan can lower your payments to 10% or 20% of your discretionary income. And as long as you continue to regularly make your payments, your remaining student loan balance may be forgiven in 20 or 25 years.Another repayment method is student loan refinancing. In this case, a private lender pays off your current loans and issues you a new loan, ideally with a lower interest rate and better repayment terms. However, there are pros and cons to student loan refinancing. For example, if you do get a lower interest rate, you’ll end up paying less over the life of the loan. However, a major drawback to refinancing is that you’ll lose access to federal programs and protections, like income-driven repayment plans and federal student loan forgiveness. Weigh all your options carefully.

The Takeaway

Forbearance and deferment are ways to temporarily pause or reduce federal student loan payments. These options may come in handy if you’re struggling financially once the federal pause on student loan repayment ends.The biggest difference between deferment vs. forbearance for student loans is that certain types of federal loans, such as Direct Subsidized Loans and Perkins loans, won’t accrue interest while in deferment. However, you have to apply and qualify for deferment.If you don’t qualify, or if neither deferment or forbearance is right for you, an income-driven repayment plan that could lower your monthly payments might be something to consider.You can also explore student loan refinancing, which could save you money on your loan payments if you qualify for a lower interest rate. Lantern can help you compare student loan refinancing options from multiple lenders so you can see what rates and terms you may be eligible for.  Check your student loan refinancing rate today with Lantern.

Frequently Asked Questions

Which is better: student loan deferment or forbearance?
What happens when student loans are deferred?
What is the most significant difference between deferment and forbearance?
Photo credit: iStock/monkeybusinessimages

About the Author

Chris Alexis

Chris Alexis

Chris Alexis has been putting pen to paper and fingertips to keyboard since his youth. He ultimately grew into an accomplished and award-winning writer who loves using the power of language to connect with audiences. He also strongly enjoys learning about who he is writing for so he can create something that will truly resonate with them. He has worked for a variety of companies, each of which have given him more experience and insight.
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