Forbearance vs. Deferment: What’s the Difference?
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- Forbearance and deferment both temporarily suspend student loan payments.
- Borrowers must meet eligibility requirements to qualify for either.
- Interest typically accrues with both options, but borrowers can avoid default.
- Income-based repayment plans offer an alternative to forbearance and deferment.
Falling behind on student loan payments can cause major problems. Loans become past due a single day after the payment deadline. And a late payment makes your loan delinquent. Even worse, 90 days of delinquency hurts your credit score and can result in a loan default.
Fortunately, borrowers can temporarily pause their student loan payments with deferment or forbearance. These short-term programs suspend your monthly payments and help you avoid default.
Nevertheless, both deferment and forbearance come with eligibility requirements and certain drawbacks. While these temporary relief measures keep loans from defaulting, they’re not always the best options.
What’s the Difference Between Forbearance and Deferment?
Both student loan forbearance and student loan deferment suspend loan payments. That said, with deferment or forbearance, the loan typically still accrues interest.
Forbearance provides a short-term suspension due to financial hardship. The forbearance period lasts 12 months. Borrowers may apply for an extension, with a maximum cap of three years.
Some federal borrowers find it easier to qualify for forbearance than student loan deferment. Evidence of financial hardship, including loss of employment or costly medical bills, can make you eligible for forbearance.
Like forbearance, student loan deferment suspends payments for up to three years. Borrowers must meet eligibility requirements. The types of federal deferments include the following:
- Cancer treatment
- Economic hardship
- Graduate fellowship
- School enrollment
- Military service
- Rehabilitation training
- Unemployment
Direct Subsidized Loans do not accrue interest during deferment. Other forms of federal loans and private loans, however, generally do accrue interest. Not all private lenders offer the option for forbearance or deferment, and terms differ among providers.
How to Receive Student Loan Deferment or Forbearance
Borrowers can’t simply stop making payments and hope their lenders grant them deferment or forbearance — they must apply for payment relief.
To qualify, borrowers must fill out paperwork to request a deferment or forbearance from their student loan servicer. Most lenders provide the forms online. Borrowers can also contact their servicer for information about the process.
Depending on the reason for the payment suspension, borrowers must also provide documentation. For example, those requesting a deferment while in school must submit proof of enrollment.
Loan Forbearance vs. Deferment: Which Is Right for You?
Whether student loan forbearance or deferment is a better option for you will depend mostly on your individual circumstances.
Forbearance often makes the most sense for a temporary economic hardship. Students with direct loans can benefit from choosing deferment since their loans do not accrue interest.
When evaluating options, federal borrowers can consider an income-based repayment plan. Most of these plans set the monthly payment as a percentage of your annual income. Some borrowers qualify for payments as low as $0 a month, with loan forgiveness options after a certain number of years.
Both student loan deferment and forbearance are better options than default, even when interest accrues. Default not only negatively impacts your credit score, but also can trigger an immediate repayment of the entire loan balance.
Keep in mind that loans in default do not qualify for forbearance, deferment, or income-based repayment. Make sure to take action quickly to avoid default.
Frequently Asked Questions About Forbearance vs. Deferment
Lenders temporarily suspend payments for loans in forbearance. Most lenders offer forbearance as a short-term solution for avoiding default. Borrowers can qualify by demonstrating economic hardship. While borrowers don’t need to make payments, interest still accrues. Forbearance generally lasts up to 12 months.
Deferment temporarily suspends payments on a student loan for up to three years. Borrowers do not need to make monthly payments on the loan; however, most loans in deferment continue to collect interest. Borrowers can qualify for deferment based on factors like economic hardship and unemployment or by enrolling in school or the military.
Both forbearance and deferment help borrowers avoid their loan going into default. That said, borrowers should consider alternatives — such as income-based repayment options — before applying for temporary payment suspensions. Those with low incomes may qualify for monthly payments as low as $0 under income-based repayment.
DISCLAIMER: The information provided on this website does not, and is not intended to, constitute professional financial advice; instead, all information, content, and materials available on this site are for general informational purposes only. Readers of this website should contact a professional advisor before making decisions about financial issues.
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