Making student loan payments isn’t always easy. And it becomes extra challenging if your income drops, you decide to go back to school, or you’re experiencing a health issue. Student loans offer two somewhat unique options — deferment and forbearance — to get you through times when making your payments becomes very tough.
Editor’s note: If you’re having difficulty making your student loan payments due to COVID-19, you may be eligible for help. Check out the Student Loan Debt Resources section of Resolve’s guide to Debt in a Time of Crisis.
The difference between deferment and forbearance
Deferment and forbearance both allow you to temporarily postpone paying your student loans. The biggest difference between the two is how you qualify and what happens with your interest during those postponements.
With forbearance, you’re responsible for paying the interest that accrues during your forbearance period. The interest will either be added to the balance of your loan or you can make interest-only payments during your forbearance, which is a good idea if you can afford it. With deferment, if you have a subsidized loan, the government pays the interest for you. Which is why deferment is the better option if you can get it, says Michael Bovee, co-founder of debt relief company Resolve. If you have an unsubsidized loan and get a deferment, you’ll have to pay the interest.
Private lenders don’t have to offer deferment or forbearance on student loans, but many do. With a private student loan, though, you’ll have to pay the interest no matter what.
Neither deferment or forbearance offers a long-term fix for your financial problems, but they’re useful options if your finances temporarily take a hit.
Related article: Federal student loan relief: what you need to know
How deferment and forbearance work
To receive a deferment or forbearance, you’ll have to apply by getting in touch with your loan service provider. If you have a federal student loan, you can log into your My Federal Student Aid account to find your provider.
Deferment is a better option, but if you don’t qualify, you can apply for a mandatory forbearance or general forbearance. You can choose a forbearance that postpones your payments altogether or one that temporarily lowers your monthly payments.
Deferments can last as long as three years in some cases, with others that last as long as you are eligible. A forbearance lasts at most 12 months at a time, but you can be approved for another forbearance.
How to qualify for deferment
Deferment is generally harder to get, but if you qualify, you won’t have to pay the interest that accrues during the deferment period if you have one of the following loans:
- Direct Subsidized Loans
- Subsidized Federal Stafford Loans
- Federal Perkins Loans
- The subsidized part of Direct Consolidation Loans
- The subsidized part of FFEL Consolidation Loans
There are many ways to qualify for a deferment, including:
- You’re enrolled half-time in a college or career school.
- You’re enrolled in a graduate fellowship program.
- You’re unemployed or can’t find full-time work for up to three years.
- You’re experiencing economic hardship.
- You’re receiving cancer treatments.
- You’re an active duty service member.
How to qualify for forbearance
There are two types of forbearances: mandatory and general. With a mandatory forbearance, if you meet the requirements, your loan servicer must approve it. With general forbearance, your loan provider decides whether to approve you or not.
Mandatory forbearance requirements include:
- You’re in a medical or dental internship or residency program.
- The amount you owe each month for all your student loans is 20% or more of your monthly gross income.
- You’re serving in AmeriCorps.
- You qualify for partial repayment of your loans via the U.S. Department of Defense Student Loan Repayment Program
- You’re a teacher whose work would qualify you for teacher loan forgiveness.
- You’re a member of the National Guard and have been activated by the governor, but you’re not eligible for a military deferment.
General forbearance requirements include:
- Financial difficulties
- Medical expenses
- Change in employment
You can apply for forbearance even if you’ve already received a deferment. One example of this is if you deferred your student loans for three years while you were in school.
Staying on track
The point of deferment or forbearance is to help you when you’re in a temporary financial bind, or during a period where you’re not able to make much money, such as being in school or the Peace Corps. Both deferment and forbearance can help you avoid default, which is crucial.
If you’re facing long-term financial problems, and you have a federal student loan, then you may want to consider an income-driven repayment plan instead. These plans allow you to pay back your loan based on a percentage of your monthly discretionary income. Many of these plans are very affordable, although they will cost you more in interest over the life of the loan.
Related article: 9 ways to avoid student loan debt
How Resolve can help
If you’re dealing with debt and not sure what to do, we’re here to help. Become a Resolve member and we’ll contact your creditors to get you the best offers for your financial situation. Our debt experts will answer your questions and guide you along the way. And our platform offers powerful budgeting tools, credit score insights and more. Join today.