In June of 2010, my life was in financial turmoil.
My husband had accepted a job in another state and we were expecting our first child. I had quit my job as a teacher and our son was due at the beginning of the following school year. I knew I wasn’t going to be teaching for at least a year.
To make matters more complicated, it took us nearly a year to sell our old house. We ended up paying two mortgages for quite some time.
It didn’t take long for us to realize that we needed to hit the pause button on our student loan payments. We compared deferment vs forbearance as potential options. Thankfully, we qualified for student loan forbearance, which gave us the breathing room we needed until our financial situation stabilized.
If you are facing similar economic turmoil, you might be wondering if you should pursue student loan forbearance or deferment as well. Or, maybe you’re wondering what exactly the differences are between the two.
Here’s a comparative breakdown of deferment vs forbearance, what kinds of loans qualify for each, and which option is the right one for you.
Qualifying forbearance vs deferment loans
The first thing to remember is that deferment and forbearance are both available for federal student loans. Federal student loans take on many forms, such as Stafford loans .
Although the Perkins Loan program ended in September, 2017, older Perkins Loans are still eligible for forbearance and deferment.
In order to qualify for deferment or forbearance, you must not be in default on your federal student loans.
Generally, you won’t be eligible for either deferment or forbearance with private loans.
Characteristics of deferment vs forbearance
Did you know that deferment and forbearance are two very different processes?
They are similar in that they both allow you to postpone your monthly federal student loan payments. But the particulars are different in some very important ways. This is is important to keep in mind when comparing deferment vs forbearance.
When you defer payments, you postpone your monthly payments on subsidized loans without accruing interest. Subsidized loans include Direct Subsidized loans, and Subsidized Federal Stafford loans.
If you have unsubsidized loans, a deferment allows you to postpone payments, but the interest will accrue on your loans during the deferment period. You may pay the interest during your deferment period in order to avoid having it capitalized and added to your principal, but you are not required to.
Borrowers are eligible for deferment under the following circumstances:
- You are enrolled at least half-time in postsecondary school.
- You are enrolled full-time in an approved graduate program.
- You are disabled and enrolled in an approved rehabilitation training program.
- You are unemployed or unable to find full-time employment. This type of deferment is limited to three years.
- You are experiencing economic hardship, as defined by federal regulations. This type of deferment is also limited to three years. Peace Corps service is covered by this circumstance.
- You are on active duty with the military, or you have been on active duty with the military within the last 13 months.
In order to receive a deferment, you must apply directly to your loan servicer. For information on how to contact your loan servicer, you can check the National Student Loan Data System. Deferments are granted in six-month increments.
If you believe you are eligible for deferment, use the Student Loan Deferment Calculator below to calculate how much interest you will accrue by deferring your student loans.
Student Loan Deferment Calculator
Forbearance is the option available to borrowers who are not eligible for deferment.
When your loans go on forbearance, you may pause student loan payments for up to 12 months. However, interest will accrue on your loans, whether they are subsidized or unsubsidized. That accrued interest will be capitalized, unless you pay the interest during the forbearance period.
There are some situations where forbearance is mandatory, meaning your loan servicer is required to offer you forbearance.
Mandatory forbearance applies in the following circumstances:
- You are serving in a medical or dental internship or residency program.
- Your total student loan payment each month is equal to 20 percent or more of your total monthly gross income.
- You are serving in a national service position, like Americorps.
- You are eligible for teacher loan forgiveness.
- You are eligible for the U.S. Department of Defense Student Loan Repayment Program.
- You are a member of the National Guard and have been activated by a governor, but you are not eligible for a military deferment.
If none of these circumstances apply to you, you may be eligible for a discretionary forbearance. Those are granted at your lender’s discretion, based upon the borrower’s financial hardship or illness.
In our case, my husband and I qualified for a discretionary forbearance based upon financial hardship since I was unemployed by choice (and the timing of my son’s birth), rather than due to an inability to find full-time work.
Applying for forbearance vs deferment
Even if the reason you are looking to pause your payments through either deferment or forbearance is a “mandatory” one, you still have to apply for either one through your student loan servicer. The process is never automatic.
You may also be required to submit documentation to support your request.
When my husband and I requested forbearance, we needed to provide documents showing that we were paying two mortgages at one time in order to prove that we were experiencing financial hardship.
Once you have submitted your request for deferment or forbearance, you must continue to pay your monthly student loan payments until you hear that your request has been granted.
If you fail to make payments and your deferment or forbearance request is denied, then you will be considered delinquent and will risk defaulting on your loan.
Taking advantage of student loan deferment vs forbearance
Understanding the differences between deferment vs forbearance is an important part of being an informed borrower.
Whether or not you are currently facing an economic hurdle, The ability to pause student loan payments is one of the biggest perks of federal student loans.
Make sure you know all of your options so you can be ready if you ever need to take a break from your student loan payments.
Interested in refinancing student loans?Here are the top 6 lenders of 2019!
|Lender||Variable APR||Eligible Degrees|
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1 Important Disclosures for SoFi.
2 Important Disclosures for Earnest.
To qualify, you must be a U.S. citizen or possess a 10-year (non-conditional) Permanent Resident Card, reside in a state Earnest lends in, and satisfy our minimum eligibility criteria. You may find more information on loan eligibility here: https://www.earnest.com/eligibility. Not all applicants will be approved for a loan, and not all applicants will qualify for the lowest rate. Approval and interest rate depend on the review of a complete application.
Earnest fixed rate loan rates range from 3.89% APR (with Auto Pay) to 7.89% APR (with Auto Pay). Variable rate loan rates range from 2.54% APR (with Auto Pay) to 7.27% APR (with Auto Pay). For variable rate loans, although the interest rate will vary after you are approved, the interest rate will never exceed 8.95% for loan terms 10 years or less. For loan terms of 10 years to 15 years, the interest rate will never exceed 9.95%. For loan terms over 15 years, the interest rate will never exceed 11.95% (the maximum rates for these loans). Earnest variable interest rate loans are based on a publicly available index, the one month London Interbank Offered Rate (LIBOR). Your rate will be calculated each month by adding a margin between 1.82% and 5.50% to the one month LIBOR. The rate will not increase more than once per month. Earnest rate ranges are current as of March 18, 2019, and are subject to change based on market conditions and borrower eligibility.
Auto Pay discount: If you make monthly principal and interest payments by an automatic, monthly deduction from a savings or checking account, your rate will be reduced by one quarter of one percent (0.25%) for so long as you continue to make automatic, electronic monthly payments. This benefit is suspended during periods of deferment and forbearance.
The information provided on this page is updated as of 0318/2019. Earnest reserves the right to change, pause, or terminate product offerings at any time without notice. Earnest loans are originated by Earnest Operations LLC. California Finance Lender License 6054788. NMLS # 1204917. Earnest Operations LLC is located at 302 2nd Street, Suite 401N, San Francisco, CA 94107. Terms and Conditions apply. Visit https://www.earnest.com/terms-of-service, email us at email@example.com, or call 888-601-2801 for more information on ourstudent loan refinance product.
© 2018 Earnest LLC. All rights reserved. Earnest LLC and its subsidiaries, including Earnest Operations LLC, are not sponsored by or agencies of the United States of America.
3 Important Disclosures for Laurel Road.
Laurel Road Disclosures
However, if the borrower chooses to make monthly payments automatically by electronic funds transfer (EFT) from a bank account, the fixed rate will decrease by 0.25%, and will increase back up to the regular fixed interest rate described in the preceding paragraph if the borrower stops making (or we stop accepting) monthly payments automatically by EFT from the designated borrower’s bank account.
However, if the borrower chooses to make monthly payments automatically by electronic funds transfer (EFT) from a bank account, the variable rate will decrease by 0.25%, and will increase back up to the regular variable interest rate described in the preceding paragraph if the borrower stops making (or we stop accepting) monthly payments automatically by EFT from the designated borrower’s bank account.
4 Important Disclosures for LendKey.
Refinancing via LendKey.com is only available for applicants with qualified private education loans from an eligible institution. Loans that were used for exam preparation classes, including, but not limited to, loans for LSAT, MCAT, GMAT, and GRE preparation, are not eligible for refinancing with a lender via LendKey.com. If you currently have any of these exam preparation loans, you should not include them in an application to refinance your student loans on this website. Applicants must be either U.S. citizens or Permanent Residents in an eligible state to qualify for a loan. Certain membership requirements (including the opening of a share account and any applicable association fees in connection with membership) may apply in the event that an applicant wishes to accept a loan offer from a credit union lender. Lenders participating on LendKey.com reserve the right to modify or discontinue the products, terms, and benefits offered on this website at any time without notice. LendKey Technologies, Inc. is not affiliated with, nor does it endorse, any educational institution.
5 Important Disclosures for CommonBond.
Offered terms are subject to change. Loans are offered by CommonBond Lending, LLC (NMLS # 1175900). If you are approved for a loan, the interest rate offered will depend on your credit profile, your application, the loan term selected and will be within the ranges of rates shown.
All Annual Percentage Rates (APRs) displayed assume borrowers enroll in auto pay and account for the 0.25% reduction in interest rate. All variable rates are based on a 1-month LIBOR assumption of 2.5% effective February 10, 2019.
6 Important Disclosures for Citizens Bank.
Citizens Bank Disclosures
|2.54% – 7.12%3||Undergrad & Graduate|
|2.54% – 7.27%1||Undergrad & Graduate|
|2.67% – 8.96%4||Undergrad & Graduate|
|3.23% – 6.65%2||Undergrad & Graduate|
|2.69% – 7.43%5||Undergrad & Graduate|
|2.98% – 9.72%6||Undergrad & Graduate|