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

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.

Deferment

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

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Forbearance

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.

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