If you’re having trouble repaying your federal student loans, you may be able to use deferment or forbearance to reduce the number of your payments or even stop making payments on a temporary basis.
The key difference between deferment and forbearance is that with forbearance, you will definitely be required to pay the interest that accrues on your loans. With deferment, you may or may not be required to pay accrued interest, depending on the type of federal student loan the deferment applies to.
Forbearance and deferment are available to help students pay off their federal loans without undue financial hardship. Generally, deferment is applied for longer periods of time, while forbearance is for a limited number of months. Find out which circumstances may qualify you for one of these options and how you can request deferment or forbearance on your student loans.
Paying Interest
Deferment and forbearance both allow those with federal student loans to temporarily stop making monthly payments or reduce the number of their payments. However, the accrued interest on these loans is handled differently depending on what type of loan you have and whether you choose deferment or forbearance.
If you are approved for deferment for your loans, you may not have to pay accrued interest during the deferment period. You will not be responsible for paying interest during deferment for the following types of federal loans:
- Direct Subsidized Loans.
- Subsidized Federal Stafford Loans.
- Federal Perkins Loans.
- Subsidized portions of Direct Consolidation Loans.
If deferment is applied to any of the following loan types, you will be responsible for paying any interest that accrues:
- Direct Unsubsidized Loans.
- Unsubsidized Federal Stafford Loans.
- Direct PLUS Loans.
- Unsubsidized portions of Direct Consolidation Loans.
With forbearance, you are always responsible for paying the interest that continues to build up while your loan payments are paused or reduced. There are two main options for paying that accrued interest, either during forbearance or during deferment with certain loan types:
- Add the total accrued interest to your loan principal balance at the end of the forbearance period.
- Pay the interest as it accrues.
Borrowers are encouraged to try the second option if possible. If you choose the first option instead, the total amount you end up paying for your loan (principal plus interest) will increase, and it may take longer to pay back the loan. The exception is for Perkins Loans; unpaid interest is not added to the loan principal balance if you choose forbearance with this type of federal student loan.
Qualifying for Deferment
When borrowers have trouble paying back their federal student loans, deferment is often preferred. In addition to being exempt from the accrued interest in many cases, deferment can usually be applied for a longer period of time. However, the criteria for qualifying for deferment are stricter overall when compared with those for forbearance. While you cannot be denied a deferment if you qualify, the circumstances under which you can become eligible are more limited.
In order to qualify for a deferment on your federal student loans, one of the following criteria must apply:
- You are enrolled at least half-time at an approved college.
- You are enrolled in an approved graduate fellowship program.
- You are enrolled in an approved rehabilitation training program for the disabled.
- You are serving in the Peace Corps.
- You are on active duty military service.
- You are unemployed or underemployed (unable to find full-time work).
- You are experiencing economic hardship (earning a monthly income of less than 150 percent of your state’s poverty line).
You will have to fill out an application to see if you qualify for deferment. Those applying under economic hardship circumstances will have an additional form to fill out with details regarding their income and family size.
Keep in mind that you must continue making on-time federal student loan payments until you receive notification that your deferment request has been approved. Failing to make payments before your deferment has been granted could potentially result in defaulting on your loan.
Qualifying for Forbearance
Forbearance is an excellent option for borrowers who are having trouble paying their loans due to temporary circumstances. Forbearance periods are limited to no more than 12 months at a time. While you can reapply, it’s best to choose this option only when you know the situation affecting your finances is temporary.
There are two types of forbearance: mandatory and general. If you fulfill the eligibility criteria for a mandatory forbearance, your loan servicer must grant it. You qualify for mandatory forbearance if:
- You are serving in a medical or dental internship or residency program.
- You received a national service educational award from and are serving in an AmeriCorps position.
- You qualify for partial loan repayment through the U.S. Department of Defense Student Loan Repayment Program.
- You are a member of the National Guard and are not eligible for a military deferment.
- Your work qualifies you for teacher loan forgiveness.
- Your total monthly federal student loan payment is equal to 20 percent or more of your total monthly gross income.
With general forbearance (also known as discretionary forbearance), your loan servicer decides whether to grant your forbearance request. You may qualify for general forbearance if:
- You are experiencing financial difficulties.
- You have unusually high medical expenses.
- You recently had a change in employment.
- You have another type of hardship affecting your ability to make your monthly payments.
Other Options
Now that you know more about the difference between deferment and forbearance, you can decide whether these options are suitable for your situation. In addition, it’s important to understand that there may be other repayment options if you are experiencing financial strain due to your federal student loans. For example, you may qualify for an income-based repayment plan, an income-contingent repayment plan, an income-sensitive repayment plan, a graduated repayment plan, or an extended repayment plan. You may also be able to consolidate your loans to lower your monthly payment.
Deferment and forbearance are quite similar in many ways, but understanding the different requirements and criteria for each will help you determine which is the right choice for you.
