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Editor’s note: In response to the coronavirus national emergency, interest, payments and collections of federally held student loans have been suspended through September 1, 2023.
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 vs. forbearance
- When to choose deferment vs. forbearance
- Alternatives to deferment and forbearance
- What to do if your student loans are in default
Deferment vs. forbearance
If you’re considering deferment vs. forbearance, here are several important points to keep in mind:
| Deferment | 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 |
| Availablity | Granted by servicer in certain situations |
|
| Credit impact | None | None |
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
- Unemployed
- Military
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.
Keep reading: Statute of Limitations on Private Student Loans: State Guide
Private student loan deferment vs. forbearance
Private student loans aren’t eligible for federal student loan deferment or forbearance. Instead, pausing your payments is up to your lender.
They might 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.
If you’re struggling to make your payments, be sure to reach out to your lender to see what assistance might be available to you.
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
Federal student loan borrowers have several repayment options available to them, including income-driven repayment (IDR) plans. If you sign up for an IDR plan, your payments will be based on your income — typically 10% to 20% of your discretionary income.
This could significantly reduce your monthly payments — possibly even bringing them down to $0 if you are unemployed or have a low income. Additionally, you could have any remaining balance forgiven after 20 or 25 years, depending on the plan.
Student loan refinancing
Student loan refinancing is the process of paying off your old loans with a new private student loan — leaving you with just one loan and payment to manage.
Depending on your credit, refinancing might get you a lower interest rate, which could save you money on interest and potentially help you pay off your loans faster.
Or you could opt to extend your repayment term to reduce your monthly payments and lessen the strain on your budget — though you’ll pay more interest over time with a longer term.
Just keep in mind that unlike with deferment or forbearance, you’ll typically need good to excellent credit to qualify for refinancing — a good credit score is usually considered to be 700 or higher.
Also note that while you can refinance both federal and private student loans, refinancing federal loans will cost you access to federal benefits and protections — such as IDR plans and student loan forgiveness programs.
If you decide to refinance your student loans, be sure to consider as many lenders as possible to find the right loan for your situation.
Credible makes this easy — you can compare your prequalified rates from multiple lenders in two minutes.
See Your Refinancing Options
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What to do if your student loans are in default
If you miss a payment, your student loan will be considered delinquent. After missing payments for a certain amount of time (270 days for most federal student loans and 120 days for most private loans), your loan will enter default status.
Once your loan has entered default, you’ll no longer be eligible for deferment or forbearance options. However, if you have federal student loans, you have a couple of options that could help you get out of default:
- Rehabilitation: With this option, you’ll have to make on-time payments for nine to 10 consecutive months, depending on the type of federal loans you have. If you successfully make the required payments, the default status will be removed from your loan as well as from your credit report.
- Consolidation: Another strategy is to consolidate your federal loans into a Direct Consolidation Loan, which could extend your repayment term up to 30 years. Keep in mind that before you can consolidate, you’ll have to either agree to repay the loan on an IDR plan or make three consecutive, on-time, full payments first. Additionally, unlike rehabilitation, consolidation won’t remove the default status from your credit report.
However, many private lenders offer a rehabilitation program that could help you get private loans out of default. Be sure to reach out to your lender to see what assistance is available to you.
Keep Reading: How to Get Student Loan Repayment Help
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