Deferment or Forbearance: Which Is Best For You? A Detailed Comparison

What is Deferment?

Deferment of your student loans means putting payments on pause for a period of time. It’s estimated that 3.3 million borrowers have student loans in deferment. Under a deferment, you may not have to pay the interest that accumulates while your loans are in deferment, depending on the types of loans you have.

For example, if you have Direct Subsidized Loans you will not have to pay the interest that accrues. But if you have Direct Unsubsidized Loans you do have to pay the interest. If you see the word ‘unsubsidized’ in your loan that means you’re on the hook for interest.

Subsidized loans by their very nature and name help offset some of the costs, so you don’t have to pay interest on those loans.

Qualification

There are various ways to qualify for a deferment including:

• When you are currently in school enrolled for at least half-time you may qualify for an In-School Deferment Request.
• If you are unemployed or unable to get full-time employment you may submit an Unemployment Deferment Request and defer up to three years
• If you are serving as a member of the Peace Corps or currently experiencing economic hardship, you may be eligible Economic Hardship Deferment Request
• When you served in the military during war or a national emergency, you may be eligible for a Military Service and Post-Active Duty Student Deferment Request.
• If you are in an eligible rehabilitation program for the disabled, you may qualify for a Rehabilitation Training Program Deferment Request.
• When you are currently enrolled in an eligible graduate fellowship program you may qualify for a Graduate Fellowship Deferment Request
• If you are a parent who took out a Direct PLUS loan for your child you may defer while your child is enrolled at least half-time, as well as six months after the student ends enrollment, you may qualify for a Parent PLUS Borrower Deferment Request

What is Forbearance?

Forbearance is another way to put your student loan payments on hold for a period of time. It’s estimated that 2.6 million borrowers have their student loans in forbearance. There are two types of forbearance: general and mandatory.

General Forbearance

General forbearance can also be known as “discretionary forbearance” because it’s up to your loan servicer whether they grant you the opportunity to put your payments on pause.

In order to qualify for general forbearance student loan borrowers must be unable to make payments due to one of the following:

• Shift in employment status
• Medical related expenses
• Financial hardship
• Other circumstances, as approved by your loan servicer.
• Must have Direct Loans, FFEL Program Loans, or Perkins Loans

If you are approved for a general forbearance it can be for up to 12 months at a time. The good news is that Perkins Loans borrowers may request forbearance for a cumulative three years.

Even better news is that there are no hard and fast limits on forbearance for Direct Loans and FFEL Program Loans. However, your loan servicer may implement their own limits on forbearance so be sure to ask about their policy.

Mandatory Forbearance

Mandatory forbearance, as the name suggests, is mandatory and your loan servicer must grant you forbearance if you meet the eligibility requirements.

You may qualify for mandatory forbearance:

• If you are serving in Americorps
• If you are in a medical or dental related internship or residency
• When you are a member of the National Guard but not eligible for military deferment. You must also be activated by a governor
• If your student loan payments are 20 percent or more than your gross income each month
• When you are teaching in a program that would qualify you for teacher loan forgiveness
• If you are eligible for partial repayment through the U.S. Department of Defense Student Loan Repayment Program

Mandatory forbearance’s are available for 12 months at a time and may be extended. This forbearance option is good for borrowers who meet these specific professional requirements.

Deferment vs. Forbearance

When considering deferment vs. forbearance it really depends on your eligibility as well as the reason for putting your payments on pause. They are both good temporary options if you’re struggling to make payments. However, it’s important to note that these are temporary.

These plans use a percentage of your income as your monthly payment and in some cases, it can be as low as zero dollars if you’re not making a lot of money. Seriously!

Your payments could be zero dollars and you’d still be in good standing with your student loans and avoid default. You’d accrue a lot of interest as well, but at least you’d avoid collections, wage garnishment and other serious consequences of default.

You will need to work with your loan servicer to apply for one of these options. Many private student loan lenders don’t provide these options, but it doesn’t hurt to ask. They may have some hardship deferments, but they’re likely not as robust as options for federal student loans.

Either way, it’s always best to talk to your loan servicer if you’re struggling to make payments. Get in touch with them and get their recommendations to find an option that fits with your circumstances so you can remain in good standing and not deal with another student loan headache.

Differences Between Deferment and Forbearance

Here’s how deferment and forbearance for federal student loans compare in some key areas.

	Deferment	Forbearance
Length	Length varies by deferment type; some last three years, while others are available as long as you qualify.	No more than 12 months at a time, with no set maximum for most federal loans.
Qualifications	Tied to a qualifying event like being unemployed or enrolled in school at least half time.	A specific qualifying event is usually not necessary.
Application process	Different deferments have different forms. Send the correct one and any necessary documentation to your student loan servicer.	There is a single “general forbearance” form, though servicers can also grant forbearance over the phone.
Interest accrual	Does not accrue on subsidized federal student loans and Perkins loans.	Interest accrues on all loans.
Availability	Your servicer must grant you a deferment if you meet its eligibility criteria and have deferment time available.	It’s usually your servicer’s decision whether to grant you forbearance, though forbearance is mandatory in some instances.
Credit impact	Student loan deferment has no impact on your credit.	Student loan forbearance has no impact on your credit.

Conclusion

If you have a federal subsidized loan and a choice between deferment or forbearance, you might want to opt for deferment since interest doesn’t capitalize while your repayments are on hold. But if you have private student loans, it doesn’t matter which you sign up for since both options will increase the overall cost of your loans.