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Student loan forbearance vs. deferment: Key differences and how to choose between the two

December 5, 2022, 4:34 PM UTC
Photo illustration of a chalk drawing of a 100 dollar bill on a chalkboard, one half overlaid with blue and one half overlaid with orange.
If you're struggling to make your student loan payments, forbearance or deferment can put your payments on pause.
Photo illustration by Victoria Ellis/Fortune; Original photo by Getty Images

It’s not uncommon for financial circumstances to change for student loan borrowers over the life of their loans. Whether it’s an unexpected illness, a job loss, or a pandemic, emergencies and unforeseen circumstances can make it more difficult to make regular payments on your student loans. When this happens, putting payments on pause through forbearance or deferment can help borrowers prioritize other financial obligations before resuming payments on their student loans. 

More than 42 million Americans across the nation shoulder some of the student loan debt burden, with the total average balance for federal and private borrowers at a staggering $40,780, according to the Education Data Initiative. Per the most recent figures from the Office of Federal Student Aid, over 50% of borrowers (25.5 million) have loans in forbearance as of September, 2022, with 2.8 million borrowers in deferment as of Q3 of 2022. 

These alternative options can come in handy when repayment becomes too much to handle. “You’d use deferment or forbearance if you can’t afford your income driven repayment plan or if you were planning to return to the public sector and were not currently getting public student loan forgiveness (PSLF) credit,” says Travis Hornsby, CFA, founder and CEO at Student Loan Planner. However, they are not without their own set of drawbacks. “Interest can capitalize when you use these loan statuses,” Hornsby adds. 

What is student loan forbearance?

Federal student loan forbearance allows you to skip your student loan payments for a given time or temporarily make a smaller payment. The catch: Interest will still accrue on your balance. You can choose to continue making these interest payments, or you can have this interest added to your principal balance. If you choose the latter, you’ll owe more money back to your student loan servicer once your forbearance period is up. 

There are two main types of student loan forbearance: 

  1. General forbearance: Sometimes called “discretionary forbearance,” this is a type of forbearance that gives your loan servicer the power to decide whether to grant a request for a general forbearance. You might qualify if you’re temporarily unable to make your scheduled monthly loan payments due to certain financial difficulties like costly medical expenses or a change in employment. General forbearances are available for Direct Loans, Federal Family Education (FFEL) Program loans, and Perkins Loans.
  2. Mandatory forbearance: Your student loan servicer is required to grant you forbearance if you meet certain requirements like serving in an AmeriCorps position, medical or dental internship, or residency program; holding a teaching job that would qualify you for teacher loan forgiveness; and more. These forbearances are only granted 12 months at a time. At the end of each forbearance period, you can request another mandatory forbearance period if you continue to meet the eligibility requirements

In some cases, the federal government may implement a nationwide forbearance period, like the student loan moratorium that was instituted at the start of the pandemic which put a pause on payments and interest accrual through June 2023. 

What is student loan deferment? 

Student loan deferment is a similar concept in that borrowers can pause their payments for a set period. The difference is that interest does not always continue to accrue on your loans. Certain loans like Direct Subsidized Loans, Subsidized Federal Stafford Loans, Federal Perkins Loans, and the subsidized portion of FFEL Consolidation Loans generally do not require you to pay accrued interest during the deferment period. 

To qualify for deferment of federal student loans, you’ll need to meet certain eligibility requirements and provide your student loan servicer with supporting documentation as proof.  Common types of deferment include: 

  • Cancer treatment deferment while you are undergoing cancer treatment and for six months after your treatment ends.
  • Economic hardship deferment (up to three years) if you are receiving a means-tested benefit, like welfare, work full-time but have earnings that are below 150% of the poverty guideline for your family size and state of residence; or are serving in the Peace Corps.
  • Graduate fellowship deferment if you are enrolled in an approved graduate fellowship program. 
  • In-school deferment if you’re enrolled at least half-time at an eligible college or career school. 
  • Military service and post-active duty student deferment if you are on active duty military service or have completed qualifying active duty service. 
  • Parent PLUS borrower deferment for parents who received a Direct PLUS Loan to pay for their child’s education, and the student is enrolled at least half-time at an eligible college or career school. 
  • Rehabilitation Training deferment for borrowers who are enrolled in an approved rehabilitation training program. 
  • Unemployment deferment if you receive unemployment benefits or you are actively looking for a role and cannot secure full-time employment. 

Choosing between forbearance and deferment 

Both student loan forbearance and deferment are meant to help you reach the common goal of pausing your payments until you’re in a financial position where you can comfortably afford to chip away at your student debt. “While both options can help you postpone payments, neither is a good long-term solution,” says Tony Aguilar, CEO and founder of Chipper, a student loan repayment app. “If you don’t expect your financial situation to improve, consider enrolling in an income-driven repayment plan (IDR) instead of pausing repayment.”

Where deferment or forbearance pauses your payments completely, income-driven plans set monthly payments based on your earnings. In some cases, if a borrower is unemployed or earns a lower income, payments can be as little as $0. “While paying less can also cause interest to grow, IDR has the added benefit of forgiveness after 20 or 25 years of repayment,” says Aguilar.

If you do find yourself in a challenging position and even the most affordable repayment plan isn’t an option, choosing between deferment and forbearance will ultimately depend on a few different factors: 

  • The type of student loan(s) you have: Private lenders may or may not offer deferment or forbearance options, and the rules and eligibility requirements could look drastically different from federal loans if they do. If you have a mix of private and federal loans, you’ll want to contact your private lender to learn more about what your options are. 
  • Length of the pause: Deferment usually lasts longer than forbearance. Some types of deferment can last up to three years, while other types of deferment will continue as long as you meet the eligibility requirements. Most types of forbearance periods last 12 months and then require you to re-apply and re-submit documentation to prove that you still qualify. 
  • Interest accrual: Depending on the type of loan you have, you may or may not be responsible for paying interest on your loans while your loan is in forbearance or deferment. Figuring out which kinds of loans you currently have and if you are in a position to continue making interest payments or not might help you decide if forbearance or deferment is worth it and how it’ll impact your monthly budget. 
  • Eligibility requirements: Both forbearance and deferment have their own set of eligibility requirements, sometimes tied to a specific event like the start of active duty service or losing your full-time job. Although, this isn’t always the case. Consider your own unique set of financial circumstances to determine which kind of pause you may be eligible for and for how long. 

The takeaway 

If you’re struggling to make payments on your student loans, consider all of your options before resorting to freezing your payments altogether and potentially extending the amount of time it will take you to reach a zero balance. Contact your loan servicer to discuss all of the repayment plans and forgiveness options available to you to determine the right course of action. 

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