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Editor’s note: In response to the coronavirus national emergency, interest rates on federally-held student loans have been reduced to 0% through Sept. 30, 2020, and borrowers have the option of suspending their payments for six months without accruing interest. During the temporary relief period, servicers who collect payments on federal student loans have been ordered to grant forbearance when requested, and the Department of Education has suspended “involuntary collection” on defaulted loans including garnishment of wages, tax returns or social security checks through Sept. 30.
If you’re struggling to keep up with your student loans, you might be able to temporarily pause your payments student loan deferment or forbearance.
Deferment and forbearance both pause your monthly payments, but they work in different ways. If you have eligible loans, interest may stop accruing during deferment. With forbearance, your loans always continue to accrue interest, which is then added to your balance when you begin repayment.
Here’s what to consider before choosing deferment or forbearance:
- Deferment vs. forbearance
- What is student loan forbearance?
- What is student loan deferment?
- Private student loan deferment and forbearance
- When to choose deferment vs. forbearance
- Alternatives to deferment and forbearance
Deferment vs. forbearance
|Interest accrual||Depends on loan||Yes|
|When to consider||Financial hardship|
|How to apply||Submit federal deferment form or contact loan servicer||Contact loan servicer|
|Eligibility||Varies based on the type of deferment||Loan servicer’s discretion|
What is student loan forbearance?
Student loan forbearance lets you temporarily pause your student loan payments for a set period of time. But, after that period, any interest that built up during the break will capitalize. That means the interest is added to the account balance that you have to pay back. Because of this, forbearance is only good for a last resort.
There are two types of forbearance:
- General (or discretionary) forbearance: Up to your loan servicer to grant
- Mandatory forbearance: Must be provided if you qualify under specific programs for military, AmeriCorps, or teachers, as well as other limited circumstances
How to apply for student loan forbearance
General forbearance is at the discretion of your student loan servicer. To apply, complete the federal forbearance form and send it to your servicer or follow these steps:
- Contact your servicer: If you don’t know your student loan servicer, check your latest statement to see who you pay and how to contact them. In some cases, you can request forbearance over the phone. Other servicers might require a written request or form.
- Continue making your payments: Until you have received a written confirmation that your forbearance is approved, continue making the minimum payments as scheduled.
- Reapply or resume payments: If you need to extend your forbearance, contact your loan servicer before the end date. Otherwise, resume your scheduled payments, since missed payments could put you into student loan default.
What is student loan deferment?
Student loan deferment is another way to temporarily postpone student loan payments. Unlike forbearance, interest doesn’t continue accruing on subsidized federal student loans and Perkins loans. But other types of loans still accrue interest. If you’re eligible, deferment is generally a better choice than forbearance.
Deferment is available if you are:
- In economic hardship
- In school
Other limited circumstances could also be eligible. Like forbearance, you can request deferment through your loan servicer.
How to apply for student loan deferment
Applying for deferment is similar to forbearance. Just follow these steps to get started:
- Contact your loan servicer: If you don’t know your student loan servicer, check your latest statement to see who you pay and how to contact them.
- Complete the deferment form: Go to the Federal Student Aid website and complete the appropriate form for your situation.
- Submit your form and documentation: Gather your forms and any required documents and submit them to your loan servicer for approval.
- Continue making your payments: Until you’re approved for deferment, you must keep making your payments. Stopping early could harm your credit or lead to default.
- Reapply or resume payments: If your deferment is ending and you need more time, contact your loan servicer to reapply. Otherwise, continue your payments.
Private student loan deferment and forbearance
Private student loans aren’t eligible for federal student loan deferment or forbearance. Instead, pausing your payments is up to your lender. They may be willing to work with you and give you a break, but you can count on having to pay everything back, including accrued interest, when you resume your regular payments.
When to choose deferment vs. forbearance
Deferment and forbearance are both temporary, so they shouldn’t be used for long-term financial hardship. But if you’re undergoing a short-term hardship, deferment or forbearance might be right for you.
Here are some situations and when you should deferment or forbearance:
|Situation||Deferment or forbearance|
|Unemployed and looking for a new job||Deferment|
|Going back to school||Deferment|
|Joining the armed forces||Deferment|
|Temporary illness or injury||Deferment or forbearance|
Keep in mind that if you should choose forbearance, your loan balance will grow every month you don’t make payments. Generally, deferment is a better choice.
Alternatives to deferment and forbearance
If you don’t qualify for deferment, have unsubsidized loans, or just want a better option, there are alternatives to deferment and forbearance. Here are a couple of alternatives to consider:
- Income-driven repayment: An income-driven repayment plan won’t pause your monthly payment but could lower it for the long term since it’s based on your income.
- Student loan refinancing: If you have good credit, refinancing your student loans could help you qualify for a lower interest rate. But if you refinance federal student loans, you’ll no longer qualify for forgiveness programs or IDR.