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If you’re feeling crushed by the weight of your student debt, it can feel impossible to see a way out. Fortunately, you might have the option to pause payments temporarily on your federal student loans through deferment or forbearance. Generally speaking, deferment should be your first choice if you have subsidized loans, but forbearance works too if you can’t qualify for a deferment. Let’s take a closer look at deferment vs. forbearance for student loans so you know which approach, if either, is right for you.
- Deferment vs. forbearance: What’s the difference?
- How deferment works
- How forbearance works
- Before applying for either, consider income-driven repayment
Deferment vs. forbearance: What’s the difference?
The Office of Federal Student Aid offers deferment and forbearance options to borrowers with federal student loans. By putting your loans into deferment or forbearance, you can pause payments for a period of time without penalty.
But when it comes to deferment vs. forbearance, there are a few key differences, as you can see in the chart below:
| Deferment | Forbearance | |
|---|---|---|
| Length of time | Some last for 3 years, others last indefinitely as long as you qualify | Usually up to 12 months at a time, but you might qualify multiple times |
| Qualifying criteria | Economic hardship Unemployment Graduate fellowship In-School deferment Military service and post-active duty Rehabilitation training Cancer treatment | Financial difficulties Medical expenses Change in employment Medical or dental internship or residency Other reasons acceptable to your loan servicer |
| Does interest accrue? | Not on subsidized loans or Perkins loans, but it does accrue on unsubsidized loans | Yes, on both subsidized and unsubsidized loans |
| Does this period count toward loan forgiveness? | Typically no | Typically not for Public Service Loan Forgiveness (PSLF), though it could count for Teacher Loan Forgiveness. (Note: During the current forbearance offered in response to COVID-19, borrowers will still get credit toward PSLF.) |
By the way, if your loans are in default, you typically can’t qualify for deferment or forbearance. So make sure to keep making payments until your loan servicer assures you that your deferment or forbearance is up and running. If you’ve already fallen behind, look into rehabilitating or consolidating your student loans to get them back into good standing.
How deferment works
If you have subsidized loans or Perkins loans, deferment is probably a better choice than forbearance. This is because the government will cover any interest that accrues on those loans while they’re in deferment. As a result, your balance won’t grow any bigger while your payments are paused.
That said, interest will continue to accrue on any unsubsidized student loans. Note that deferment of payments is automatic for college students who are enrolled in school at least half-time and for six months after you graduate (this is called the grace period).
But if you want a deferment after you’ve graduated, you’ll have to specifically request it from your loan servicer. You can check out the deferment request forms at StudentAid.gov here.
Which loans are eligible?
All Direct loans, FFEL loans, and Perkins loans could be eligible for deferment.
What are the requirements?
You should be able to get approved for student loan deferment if one of the following describes your situation:
- Economic hardship: This could apply if you’re receiving welfare benefits, earn less than 150% of the poverty guideline, or are serving in the Peace Corps.
- Unemployment, if you’re receiving unemployment benefits or are unable to find work.
- Graduate fellowship, if you’re enrolled in an approved program.
- In-School deferment. As mentioned, this applies to students enrolled at least half-time and for six months after you graduate.
- Cancer treatment (during treatment and for six months after).
- Military service and post-active duty
- Rehabilitation training
- Parent PLUS borrower deferment: Parent PLUS borrowers can request a grace period while their student is in school, but it’s not automatic.
How forbearance works
If you don’t qualify for deferment, you might explore forbearance instead. Forbearance will also pause your payments, but interest will continue to accrue on all your student loans, regardless of whether or not they are subsidized.
As of March 13, all federal student loans have been placed into emergency forbearance at 0% interest until Sep. 30, 2020 as a result of the COVID-19 pandemic. No one has to make payments on their loans, and those working toward Public Service Loan Forgiveness will still get credit during this period.
While these are unusual circumstances, student loan forbearance usually works a little differently. For instance, borrowers typically need to apply for forbearance and have a qualifying reason. This period typically doesn’t count toward PSLF, though it can count toward the Teacher Loan Forgiveness program.
Below you’ll find the regular eligibility requirements for forbearance that applied before this national emergency — and likely will come into play again after this emergency period ends.
Which loans are eligible?
Direct loans, FFEL loans, and Perkins loans could all be eligible for forbearance.
What are the requirements?
As mentioned, all federal loans have been placed into emergency forbearance for six months due to the coronavirus pandemic. But typically, forbearance works a little differently.
For instance, there are two types of forbearance: mandatory and discretionary. If you meet the criteria for mandatory forbearance, your loan servicer has to pause your payments. But if you don’t, it’s up to the loan servicer whether or not they’ll approve your request.
Here are the criteria for both.
Mandatory forbearance:
- If you’re serving in AmeriCorps and received a national service award
- If you qualify for partial loan repayment under the Department of Defense Student Loan Repayment Program
- If you’re serving in a medical or dental internship or residency and meet certain requirements
- If you’re a member of the National Guard, have been activated by the governor, and are not receiving a military deferment
- If you’re teaching in a position that qualifies for Teacher Loan Forgiveness
- If your monthly student loan payments exceed 20% or more of your gross income
Discretionary (aka, general) forbearance:
- Financial difficulties
- Medical expenses
- Change in employment
- Other reasons acceptable to your loan servicer
Both types of forbearance usually last for 12 months at a time, though you might be able to request multiple stints.
Before applying for either, consider income-driven repayment
Putting your loans into deferment or forbearance can be a big help if you need to pause payments for a while. But you have another option to consider: an income-driven repayment plan.
Income-driven repayment plans adjust your payments along with your income. Depending on your income, your payment could be as low as $0 per month.
Even though you’re not paying anything, you’ll still be making progress toward a program like PSLF. Plus, you’ll move closer to the end of your student loan term, which could result in loan forgiveness.
Income-driven repayment plans set your loan term at 20 or 25 years and forgive any remaining balance after this time. For these reasons, an income-driven plan could be preferable to deferment or forbearance.
In the end, you want to choose the option that will get you the financial relief you need now without adding too much to your long-term costs of borrowing.
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