Both a deferment of your student loans and a forbearance can postpone required payments during times when you cannot afford to make them. The biggest difference between the two is how you qualify for the payment delay and the consequences you face in interest. Overall, you should compare the two and see which will benefit you the most—not only right now but also in the long run. If you aren’t sure, even after reading this, give us call and we can help you review your options.
A student loan deferment is a postponement of your required payments as the result of a qualifying event. The most common of which is in-school enrollment—that while you are actively enrolled at least part-time in school, you are not required to make any payments towards your student loans. Typically, for those enrolled at least half time, the deferment period can last up to 6 months following graduation as a sort of “grace period” to allow time for you to become steadily employed and prepare for making student loan repayments.
As an added bonus, while a student loan is deferred, the interest does not accrue. Other qualifying events for a student loan deferment include
- If you are enrolled in an approved graduate fellowship program or a rehabilitation training program for the disabled.
- You are unemployed, unable to find full-time employment, or experiencing an economic hardship (if you don’t fully qualify here, a forbearance may be an option).
- You are serving in the Peace Corps.
- You are on active duty military service in connection with a military operation, national emergency, or war. If you were, then the deferment concludes in the 13th month following your service—or sooner if you enroll back in school at least part-time.
Student loan deferments are available for FFEL Program Loans, Perkins Loans, and Direct Loans. Parents who take out a Direct PLUS or FFEL PLUS Loan can qualify as well for a deferment while their child is in school and up to 6 months after their child graduates or is no longer enrolled at least part-time.
The best perk about student loan deferments is, if you qualify for one, the interest does not accrue while your payments are postponed for subsidized federal student loans and Perkins Loans.
A student loan forbearance is often granted by a loan servicer whenever a borrower is facing a situation where they will be unable to make their loan payment. These scenarios may include a change in employment status, loss of income, change in employer, medical expenses, financial difficulties, and other situations your loan servicer accepts. These situations can qualify you for a general forbearance and are available for the following loan types:
- FFEL Program Loans
- Perkins Loans
- Direct Loans
Forbearances can last up to 12 months and can be requested again if your situation has not changed. Perkins Loan servicers only allow a cumulative forbearance amount of 3 years but Direct and FFEL Program Loans do not. The loan servicer for these two may, however, set a limit on the maximum period of time you can receive a general forbearance before it expires.
There are times when your student loan servicer has to grant your request for a forbearance:
- During a medical or dental residency or other internship program
- If the minimum payment for your student loans is greater than 20% of your gross income
- You are performing a teaching service that would qualify you for teacher loan forgiveness
- You are in the National Guard and have been activated—but do not qualify for a military deferment
- You can qualify for partial repayment of your loans under the U.S. Department of Defense Student Loan Repayment Program
Whether you qualify for a general forbearance or a mandatory forbearance, your payments will be put on “hold” so to speak. While payments are not required during your forbearance, the interest is still actively accruing.
Here is a quick overview chart to compare the main differences between a student loan deferment and a forbearance.
Length of Payment Delay
|Varies depending on deferment type. Can be deferred up to 3 years or for as long as you qualify.||Up to 12 months at a time. Limitations on number of times you can request a forbearance can apply.|
|Qualifications & Requirements||Must have a qualifying event to receive (i.e. enrolled in school, active duty, or loss of job)||You can qualify if you’ll have difficulty making payments. Mandatory approval of forbearance: Med/Dental Residency, Payment > 20% Income, Activated National Guard|
|Application Process||Depending on the deferment you need (enrolled in school or active duty) the application for a deferment is different. You may also be required to provide documentation.||Regardless of your reason for a forbearance, there is a single form—or you can call and speak directly to your loan servicer to apply.|
|Interest||Interest does not accrue on subsidized federal student loans or Perkins loans.||Interest does accrue.|
|Impact On Credit?||None||None|