Deferment vs. Forbearance: What’s the Best Way to Pause Student Loan Payments?

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In June 2010, my financial life was in turmoil. My husband had accepted a job in another state, and we were expecting our first child. To make matters more complicated, it took us nearly a year to sell our old house, so we ended up paying two mortgages at once for quite some time.

It didn’t take us long to realize that we needed to hit the pause button on our monthly student loan payments. We compared deferment versus forbearance as potential repayment options. Thankfully, we qualified for student loan forbearance, which gave us the breathing room we needed until our financial situation stabilized.

If you’re facing similar economic turmoil, you might be wondering if you should pursue student loan forbearance or deferment. Or, maybe you’re wondering what the differences are between deferment versus forbearance.

For a comparative breakdown of forbearance versus deferment, including what kinds of loans qualify for each option and which one might be right for you, let’s look at these four topics:

Qualifying loans for deferment vs. forbearance

The first thing to remember is that deferment and forbearance are both available for federal student loans. Federal student loans come in many forms, such as Staffordloans and PLUS loans. Although the Perkins loan program ended in September 2017, older Perkins loans are still eligible for forbearance and deferment.

To qualify for deferment or forbearance, you cannot be in default on your federal student loans.

Administrative forbearance on federal loans during the coronavirus pandemic
Only federal direct loans (not Perkins or federal family education loans) were eligible for the student loan interest freeze brought on by the COVID-19 crisis. For millions of these borrowers, payments were paused without penalty and interest rates temporarily fell to zero. The moratorium began in March 2020 and was slated to expire in September 2021. After its expiration, federal loan borrowers of all stripes could still access standard deferment and forbearance options.

If you have private student loans, you may not be eligible for either deferment or forbearance, though some lenders do offer these safety nets.

5 Private Student Loan Options That Let You Pause Payments

Characteristics of deferment vs. forbearance for federal student loans

Deferment and forbearance are two different repayment processes. They are similar in that both options allow you to postpone your monthly federal student loan payments.

But they are different in some very important ways, so bear in mind when comparing deferment versus forbearance.

Deferment

When you defer payments, you postpone your monthly dues on subsidized federal loans without accruing interest. You also don’t have to pay interest on the subsidized portion of direct consolidation loans or FFEL consolidation loans during deferment.

If you have unsubsidized loans, a deferment allows you to postpone payments, but the interest will still accrue on your loans during the deferment period. You may pay the interest during your deferment period in order to avoid having it capitalized (added to your principal), but you aren’t required to do so.

Borrowers may be eligible for deferment under the following circumstances:

  • You are enrolled at least half-time in an eligible postsecondary school.
  • You are enrolled in an approved graduate program.
  • You are 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 includes receiving federal public assistance benefits (such as food stamps), or if your monthly income does not exceed the larger of the federal minimum wage rate or 150% of the poverty line income for your family size and state. This type of deferment is also limited to three years. Peace Corps service is covered by this circumstance.
  • You are currently on active duty with the military, or you have been on active duty with the military within the last 13 months.
  • You are currently undergoing cancer treatment.

To receive a deferment, you must apply directly to your loan servicer. For information on how to contact your loan servicer, you can access the StudentAid.gov website. Deferments are typically granted in six-month increments.

If you believe you are eligible for deferment, use our student loan deferment calculator below to calculate how much interest you’ll accrue by deferring your student loans.

Student Loan Deferment Calculator

Balance

Monthly

BeforeAfterSavings
Balance
Monthly

Forbearance

Forbearance may be an option for borrowers who don’t qualify for deferment. When your loans go on forbearance, you may pause student loan payments, usually for around 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 may be available 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% or more of your total monthly gross income.
  • You are serving in a national service position through 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 general, or discretionary, forbearance. Those are granted at your lender’s discretion, based upon reasons such as the borrower’s financial hardship, medical expenses or a change in work situation.

In our case, my husband and I qualified for a discretionary forbearance based upon financial hardship since I was unemployed by choice (and because of the timing of my son’s birth), rather than due to an inability to find full-time work.

How to apply for deferment vs. forbearance for federal loans

When you’re looking to pause your payments through either deferment or forbearance, even if the reason is a mandatory one, you’ll still have to apply for either option through your student loan servicer. The process is rarely automatic.

Forms for request a federal student loan deferment
Economic hardship
Returning to school
Unemployment
Graduate fellowship
Military service
Parent PLUS borrowing
Rehabilitation training
Cancer treatment
While there aren’t specific forms to request a federal loan forbearance, be expected to provide documentation.

You may also be required to submit documentation to support your request and demonstrate that you meet the eligibility requirements. 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’ve submitted your request for deferment or forbearance, you’ll need to continue paying 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, you’ll be considered delinquent and risk defaulting on your loan.

What to consider before applying for deferment or forbearance

While applying for student loan deferment or forbearance can be a viable option for many people, it may not always be the right solution for your individual situation. Here are some questions to ask yourself before making this decision.

  • Is my current financial situation temporary? Something like a job loss or long-term illness can undoubtedly make your financial future unpredictable. But if you’re confident you’ll get things under control within a certain time frame, then deferment or forbearance could be a good option for you.
  • Do I qualify for deferment or forbearance? Before making the decision to pursue either repayment option, you’ll need to make sure you meet the specific criteria required to qualify. As previously mentioned, factors such as the type of loan, your specific financial hardship and other circumstances will be considered.
  • Is postponing my student loan payments an absolute must? If you can find a way to simply restructure your budget and/or adjust your current repayment schedule, it could be a much simpler way to get a handle on your student loan debt than applying for deferment or forbearance.

If you do decide to apply, understanding the differences between deferment versus forbearance is an important part of being an informed borrower.

Deferment Forbearance
How long does it last? From six months to three years, depending on the deferment type Maximum 12 months at a time
Will interest pile up? No (for subsidized loans), yes (for unsubsidized) Yes
Will it affect my credit? No No

Whether or not you’re 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 your options so you can be ready if you ever need to take a break from making your student loan payments.

This report was originally published Dec. 20, 2016. Andrew Penitis and Emilia Benton contributed to this report.

Interested in refinancing student loans?

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LenderVariable APREligible Degrees 
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2.50% – 6.85%3Undergrad
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1.89% – 5.90%4Undergrad
& Graduate

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2.25% – 6.39%5Undergrad
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Visit SoFi

1.88% – 5.64%6Undergrad
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1.90% – 5.25%7Undergrad
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2.39% – 6.01%Undergrad
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2.13% – 5.25%8Undergrad
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1 Important Disclosures for Splash Financial.

Splash Financial Disclosures

Terms and Conditions apply. Splash reserves the right to modify or discontinue products and benefits at any time without notice. Rates and terms are also subject to change at any time without notice. Offers are subject to credit approval. To qualify, a borrower must be a U.S. citizen or permanent resident in an eligible state and meet applicable underwriting requirements. Not all borrowers receive the lowest rate. Lowest rates are reserved for the highest qualified borrowers. If approved, your actual rate will be within a range of rates and will depend on a variety of factors, including term of loan, a responsible financial history, income and other factors. Refinancing or consolidating private and federal student loans may not be the right decision for everyone. Federal loans carry special benefits not available for loans made through Splash Financial, for example, public service loan forgiveness and economic hardship programs, fee waivers and rebates on the principal, which may not be accessible to you after you refinance. The rates displayed may include a 0.25% autopay discount

The information you provide to us is an inquiry to determine whether we or our lenders can make a loan offer that meets your needs. If we or any of our lending partners has an available loan offer for you, you will be invited to submit a loan application to the lender for its review. We do not guarantee that you will receive any loan offers or that your loan application will be approved. Offers are subject to credit approval and are available only to U.S. citizens or permanent residents who meet applicable underwriting requirements. Not all borrowers will receive the lowest rates, which are available to the most qualified borrowers. Participating lenders, rates and terms are subject to change at any time without notice.

To check the rates and terms you qualify for, Splash Financial conducts a soft credit pull that will not affect your credit score. However, if you choose a product and continue your application, the lender will request your full credit report from one or more consumer reporting agencies, which is considered a hard credit pull and may affect your credit.

Splash Financial and our lending partners reserve the right to modify or discontinue products and benefits at any time without notice. To qualify, a borrower must be a U.S. citizen and meet our lending partner’s underwriting requirements. Lowest rates are reserved for the highest qualified borrowers. This information is current as of June 1, 2021.


2 Rate range above includes optional 0.25% Auto Pay discount. Important Disclosures for Earnest.

Earnest Disclosures

Interest Rate Disclosure

Actual rate and available repayment terms will vary based on your income. Fixed rates range from 2.59% APR to 5.79% APR (excludes 0.25% Auto Pay discount). Variable rates range from 1.88% APR to 5.64% APR (excludes 0.25% Auto Pay discount). For variable rate loans, although the interest rate will vary after you are approved, the interest rate will never exceed 36% (the maximum allowable for these loans). Earnest variable interest rate student loan refinance 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 2.04% and 5.8% to the one month LIBOR. Earnest rate ranges are current as of 6/8/2021, and are subject to change based on market conditions.

Auto Pay Discount Disclosure

You can take advantage of the Auto Pay interest rate reduction by setting up and maintaining active and automatic ACH withdrawal of your loan payment. The interest rate reduction for Auto Pay will be available only while your loan is enrolled in Auto Pay. Interest rate incentives for utilizing Auto Pay may not be combined with certain private student loan repayment programs that also offer an interest rate reduction. For multi-party loans, only one party may enroll in Auto Pay.

Student Loan Refinancing Loan Cost Examples

These examples provide estimates based on payments beginning immediately upon loan disbursement. Variable APR: A $10,000 loan with a 20-year term (240 monthly payments of $72) and a 5.89% APR would result in a total estimated payment amount of $17,042.39. For a variable loan, after your starting rate is set, your rate will then vary with the market. Fixed APR: A $10,000 loan with a 20-year term (240 monthly payments of $72) and a 6.04% APR would result in a total estimated payment amount of $17,249.77. Your actual repayment terms may vary.Terms and Conditions apply. Visit https://www.earnest. com/terms-of-service, e-mail us at [email protected], or call 888-601-2801 for more information on our student loan refinance product.

Earnest Loans are made by Earnest Operations LLC or One American Bank, Member FDIC. Earnest Operations LLC, NMLS #1204917. 535 Mission St., Suite 1663, San Francisco, CA 94105. California Financing Law License 6054788. Visit earnest.com/licenses for a full list of licensed states. For California residents (Student Loan Refinance Only): Loans will be arranged or made pursuant to a California Financing Law License.

One American Bank, 515 S. Minnesota Ave, Sioux Falls, SD 57104. Earnest loans are serviced by Earnest Operations LLC with support from Navient Solutions LLC (NMLS #212430). One American Bank and Earnest LLC and its subsidiaries are not sponsored by or agencies of the United States of America.

© 2021 Earnest LLC. All rights reserved.


3 Important Disclosures for CommonBond.

CommonBond Disclosures

Offered terms are subject to change and state law restriction. Loans are offered by CommonBond Lending, LLC (NMLS # 1175900), NMLS Consumer Access. 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 0.15% effective Jan 1, 2021 and may increase after consummation.


4 Important Disclosures for Laurel Road.

Laurel Road Disclosures

All credit products are subject to credit approval.

Laurel Road began originating student loans in 2013 and has since helped thousands of professionals with undergraduate and postgraduate degrees consolidate and refinance more than $4 billion in federal and private school loans. Laurel Road also offers a suite of online graduate school loan products and personal loans that help simplify lending through customized technology and personalized service. In April 2019, Laurel Road was acquired by KeyBank, one of the nation’s largest bank-based financial services companies. Laurel Road is a brand of KeyBank National Association offering online lending products in all 50 U.S. states, Washington, D.C., and Puerto Rico. All loans are provided by KeyBank National Association, a nationally chartered bank. Member FDIC. For more information, visit www.laurelroad.com.

As used throughout these Terms & Conditions, the term “Lender” refers to KeyBank National Association and its affiliates, agents, guaranty insurers, investors, assigns, and successors in interest.

  1. Checking your rate with Laurel Road only requires a soft credit pull, which will not affect your credit score. To proceed with an application, a hard credit pull will be required, which may affect your credit score.
  2. Savings vary based on rate and term of your existing and refinanced loan(s). Refinancing to a longer term may lower your monthly payments, but may also increase the total interest paid over the life of the loan. Refinancing to a shorter term may increase your monthly payments, but may lower the total interest paid over the life of the loan. Review your loan documentation for total cost of your refinanced loan.
  3. After loan disbursement, if a borrower documents a qualifying economic hardship, we may agree in our discretion to allow for full or partial forbearance of payments for one or more 3-month time periods (not to exceed 12 months in the aggregate during the term of your loan), provided that we receive acceptable documentation (including updating documentation) of the nature and expected duration of the borrower’s economic hardship. During any period of forbearance interest will continue to accrue. At the end of the forbearance period, any unpaid accrued interest will be capitalized and be added to the remaining principle amount of the loan.
  4. Automatic Payment (“AutoPay”) Discount: if the borrower chooses to make monthly payments automatically from a bank account, the interest rate will decrease by 0.25% and will increase back if the borrower stops making (or we stop accepting) monthly payments automatically from the borrower’s bank account. The 0.25% AutoPay discount will not reduce the monthly payment; instead, the discount is applied to the principal to help pay the loan down faster.

Assumptions: Repayment examples above assume a loan amount of $10,000 with repayment beginning immediately following disbursement. Repayment examples do not include the 0.25% AutoPay Discount.

Annual Percentage Rate (“APR”): This term represents the actual cost of financing to the borrower over the life of the loan expressed as a yearly rate.

Interest Rate: A simple annual rate that is applied to an unpaid balance.

Variable Rates: The current index for variable rate loans is derived from the one-month London Interbank Offered Rate (“LIBOR”) and changes in the LIBOR index may cause your monthly payment to increase. Borrowers who take out a term of 5, 7, or 10 years will have a maximum interest rate of 9%, those who take out a 15 or 20-year variable loan will have a maximum interest rate of 10%.

KEYBANK NATIONAL ASSOCIATION RESERVES THE RIGHT TO MODIFY OR DISCONTINUE PRODUCTS AND BENEFITS AT ANY TIME WITHOUT NOTICE.

This information is current as of April 29, 2021. Information and rates are subject to change without notice.
 


5 Important Disclosures for SoFi.

SoFi Disclosures

Fixed rates from 2.74% APR to 6.74% APR (with autopay). Variable rates from 2.25% APR to 6.39% APR (with autopay). All variable rates are based on the 1-month LIBOR and may increase after consummation if LIBOR increases; see more at SoFi.com/legal/#1. If approved for a loan your rate will depend on a variety of factors such as your credit profile, your application and your selected loan terms. Your rate will be within the ranges of rates listed above. Lowest rates reserved for the most creditworthy borrowers. SoFi refinance loans are private loans and do not have the same repayment options that the federal loan program offers, or may become available, such as Income Based Repayment or Income Contingent Repayment or PAYE. SoFi loans are originated by SoFi Lending Corp. or an affiliate (dba SoFi), a lender licensed by the Department of Financial Protection and Innovation under the California Financing Law, license #6054612; NMLS #1121636 (www.nmlsconsumeraccess.org). Additional terms and conditions apply; see SoFi.com/eligibility for details. SOFI RESERVES THE RIGHT TO MODIFY OR DISCONTINUE PRODUCTS AND BENEFITS AT ANY TIME WITHOUT NOTICE.


6 Important Disclosures for Navient.

Navient Disclosures

1. NaviRefi loans are made by Earnest Operations LLC, a member of the Navient family of companies, subject to individual approval and underwriting criteria. California residents only: Loans made or arranged pursuant to a California Finance Lenders Law license. Additional terms and conditions apply.

– To qualify, you must be a U.S. citizen or non-citizen permanent resident of the United States, reside in a state we lend in, and satisfy our minimum eligibility criteria. You may find more information on loan eligibility here: https://www.navirefi.com/help-and-questions. Not all applicants will be approved for a loan, and not all applicants will qualify for the lowest rate. Loan terms are subject to eligibility. Approval and interest rate depend on the review of a complete application. Loan approval is subject to confirmation that your debt-to-income, free cash flow, credit history and application information meet the minimum requirements. You must have a minimum FICO score to be considered.

– You can choose between fixed and variable rates. Fixed interest rates are 2.75% – 6.04% APR (2.50% – 5.79% APR with Auto Pay discount). Starting variable interest rates are 2.13% – 5.89% APR (1.88% – 5.64% APR with Auto Pay discount). Variable rates are based on an index, the 30-day Average Secured Overnight Financing Rate (SOFR) plus a margin. Variable rates are reset monthly based on the fluctuation of the index. We do not currently offer variable rate loans in AK, CO, CT, HI, IL, KY, MA, MN, MS, NH, OH, OK, SC, TN, TX, and VA.

– You can take advantage of the 0.25% Auto Pay interest rate reduction by setting up and maintaining active and automatic ACH withdrawal of your loan payment. The interest rate reduction for Auto Pay will be available only while your loan is enrolled in Auto Pay. Interest rate incentives for utilizing Auto Pay may not be combined with certain private student loan repayment programs that also offer an interest rate reduction. NaviRefi rate ranges are current as of June 1, 2021 and are subject to change based on market conditions and borrower eligibility.

– The information provided on this page is updated as of 06/1/2021. Earnest Operations LLC reserves the right to modify or discontinue (in whole or in part) this loan program and its associated services and benefits at any time without notice. Check www.navirefi.com for the most up-to-date information. Terms and Conditions apply. Call 855-284-4893 for more information on our student loan refinance product.

– Earnest Operations LLC – NMLS #1204917, CA CFL #6054788 – 535 Mission St., Suite 1663, San Francisco, CA 94105.
Navient Solutions, LLC – NMLS #212430 – 123 Justison St., Wilmington, DE 19801. Visit https://navirefi.com/lending-licenses for a full list of licensed states.


7 Important Disclosures for LendKey.

LendKey Disclosures

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.

Subject to floor rate and may require the automatic payments be made from a checking or savings account with the lender. The rate reduction will be removed and the rate will be increased by 0.25% upon any cancellation or failed collection attempt of the automatic payment and will be suspended during any period of deferment or forbearance. As a result, during the forbearance or suspension period, and/or if the automatic payment is canceled, any increase will take the form of higher payments. The lowest advertised variable APR is only available for loan terms of  5 years and is reserved for applicants with FICO scores of at least 810.

As of 04/07/2021 student loan refinancing rates range from 1.90% APR – 5.25% Variable APR with AutoPay and 2.95% APR – 7.63% Fixed APR with AutoPay.


8 Important Disclosures for PenFed.

PenFed Disclosures

Annual Percentage Rate (APR) is the cost of credit calculating the interest rate, loan amount, repayment term and the timing of payments. Fixed Rates range from 2.89%-4.78% APR and Variable Rates range from 2.13%-5.25% APR. Both Fixed and Variable Rates will vary based on application terms, level of degree and presence of a co-signer. These rates are subject to additional terms and conditions and rates are subject to change at any time without notice. For Variable Rate student loans, the rate will never exceed 9.00% for 5 year and 8 year loans and 10.00% for 12 and 15 years loans (the maximum allowable for this loan). Minimum variable rate will be 2.00%. These rates are subject to additional terms and conditions, and rates are subject to change at any time without notice. Such changes will only apply to applications taken after the effective date of change.