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Student loan deferment and forbearance both allow you to pause your loan payments. But there are some differences in how each program works, including who's eligible, whether interest accrues, how long you can postpone payments and more.
If you're looking for some relief from your student loan payments, here's what you need to know about your deferment and forbearance options.
What Is Student Loan Deferment?
- You're returning to school.
- You're on or have recently returned from active duty military service.
- You're unemployed.
- You've enrolled in an approved rehabilitation program.
- You're undergoing cancer treatment.
- You're enrolled in an approved graduate fellowship program.
- You're serving in the Peace Corps.
- You're experiencing financial hardship.
- You're a parent who took out Parent PLUS Loans, and your child is still in school.
The length of your deferment can vary depending on why you qualify.
In contrast, private lenders may only offer deferment if you're returning to school, but that's not the case with all lenders. Here are some benefits and drawbacks of student loan deferment to consider.
- Interest may be subsidized: If you have federal subsidized loans or Perkins Loans, the government will pick up the tab on any interest that accrues during your deferment period.
- Can protect your credit: If you're worried about falling behind on payments or you're already behind, getting on a deferment plan can keep you from missing more payments or even defaulting on your loans. The deferment itself won't impact your credit score.
- Can give you a breather: Not having to pay your student loans can free up some cash to cover other essential expenses and give you some time to get back on your feet financially.
- Interest may accrue: If you don't have any of the loans mentioned above, interest will continue to accrue on your loans during your deferment period. At the end of the period, the lender or loan servicer will capitalize the interest and add it to your balance, which will increase your monthly payment and total costs. You can avoid this by making interest-only payments during the deferment period.
- Short-term solution: Depending on why you're requesting deferment, you may only get a few months to get your financial situation in order. Even with longer-term deferment plans, it can be difficult to return to your regular payment plan.
- No guarantee of approval: Depending on your reason for requesting deferment, you may not qualify. And if you have private loans, your lender may not even offer it as an option.
How to Sign Up
If you have federal student loans, you'll submit your request directly to your loan servicer using the correct form for your situation.
If you have private student loans, contact your lender to find out if deferment is an option and what the application process looks like.
What Is Student Loan Forbearance?
Like deferment, student loan forbearance can pause your monthly payments for various reasons. There are two types of federal student loan forbearance: mandatory and general.
With mandatory forbearance, your loan servicer is required to give you forbearance if you request it. This applies if you meet certain criteria for the following situations:
- You're serving in AmeriCorps.
- You're eligible for partial repayment of your loans through the U.S. Department of Defense Student Loan Repayment Program.
- You're in a medical or dental internship or residency program.
- You're a member of the National Guard who's been activated by your governor but aren't eligible for military deferment.
- You're a teacher whose service qualifies for the Teacher Loan Forgiveness Program.
- Your monthly payment is more than 20% of your gross monthly income.
General forbearance is also referred to as "discretionary forbearance" because it's at your loan servicer's discretion whether or not to approve your application. You may apply for this option if you're experiencing financial difficulties, have medical expenses, have had a recent change in employment or for any other reason that your loan servicer accepts.
Regardless of the type of forbearance you request, it can only be granted for up to 12 months at a time. Terms and eligibility requirements can vary from lender to lender, and if you have private student loans, your lender may or may not offer forbearance at all.
- Protect your credit: As with deferment, forbearance can give you a break on payments without negatively impacting your credit score.
- Help you get back on track: If you're struggling financially, forbearance can relieve some of the pressure on your budget, giving you time to get back on your feet financially.
- Interest accrues: Regardless of the type of loans you have, interest will continue to accrue and be capitalized at the end of your forbearance period unless you make interest-only payments during the forbearance period.
- Temporary solution: While you can get up to 12 months of forbearance at a time with federal loans, that may not be enough time to help you get back on track. If you have private student loans and your lender offers forbearance, you may only get a few months at a time. Make sure to prepare for payments to resume after your forbearance period is over.
- May not be eligible: Unless you qualify for mandatory federal forbearance, your loan servicer gets to decide whether you're eligible. And if you have private student loans, your lender may not even offer forbearance as an option.
How to Sign Up
If you have federal student loans, review the forbearance application forms and select the one that best fits your situation, then submit it to your loan servicer.
If your loans are private, contact your lender directly to ask about your options and how to apply for relief.
When to Choose Deferment vs. Forbearance
For the most part, your decision will be based on your reasons for needing relief from your monthly payments. With federal loans, there are specific types of deferment and forbearance, so you'll want to review each one and apply for the one that fits your situation.
If you have subsidized loans or Perkins Loans and can qualify for either deferment or forbearance, consider choosing deferment so you can avoid having interest accrue on your loans.
If you have private student loans, you may be limited based on what your lender offers. Call and speak with a customer service representative to get an idea of what's available and which option is best for your needs.
Alternatives to Deferment and Forbearance
Every situation is different, but it's always a good idea to research all of your options to determine the best course of action. Some potential alternatives to both deferment and forbearance include:
- Income-driven repayment plans: For longer-term relief on federal loans, you may apply for an income-driven repayment plan. These plans reduce your monthly payment to 10% to 20% of your discretionary income and extend your term to 20 or 25 years. Once your repayment period is over, any remaining balance will be forgiven.
- Student loan refinancing: Refinancing federal student loans with a private lender may not be the right move if you want access to better relief programs in the future. But if you have private loans, you can refinance them with another lender that offers better relief options or can give you a longer repayment term, resulting in a lower payment.
- Budgeting: Depending on your situation, you may be able to better afford your student loan payments by scrutinizing your budget and making some adjustments. Take a look at your expenses and look for areas of discretionary spending where you can cut back and reallocate those funds toward your student loans.
- Picking up a side gig: If you've tried everything and still can't quite find enough money to pay your student loans, consider taking up a side gig. Even driving for a rideshare app a few nights a month or pet sitting during the summers can give you the extra boost you need to ensure your payments get made on time.
Focus on Protecting Your Credit Score
Regardless of how you choose to handle your student loans, it's crucial that you prioritize protecting your credit score from late payments and default. Deferment and forbearance can do that, but consider other options to avoid missing payments.
Also, consider using Experian's free credit monitoring service to track your credit score and Experian credit report, so you can see how your actions impact your credit over time.