Student Loan - Deferment vs Forbearance

Student loan deferment and student loan forbearance both can be postponed for the loan payments when you can’t afford them. The major difference is that forbearance always increases the amount you owe, on the other hand, deferment can be interest-free for certain types of federal loans.

When considering deferment versus forbearance, the right choice will depend on the personal situation you are in:

Deferment: It is generally better if you have subsidized federal student loans or Perkins loans and you are unemployed dealing with significant financial hardship.
Forbearance: It is generally better if you don’t qualify for deferment and your financial challenge is temporary.

While both options can help you in avoiding student loan defaults, neither is a good option to opt for a long-term solution. If there is no chance for your financial situation to improve, consider enrolling for an income-driven repayment plan instead of pausing repayment.

Table of contents

Deferment and Forbearance - Difference
The best option - Deferment or Forbearance
Income-driven repayment

Deferment and Forbearance - Difference

	Deferment	Forbearance
Term period	Length varies by deferment type - some last three years and others are available as per your qualification.	Not more than 12 months at a time.
Qualifications	Can be opted when unemployed or enrolled in school at least half time.	A specific qualifying event is not necessary, can be applied as per the need.
Application process	Different deferments will have different forms.	There is a single “general forbearance” form, though servicers can also grant forbearance and this can be done over the phone.
Interest accrual	Interest does not accrue on subsidized federal student loans.	Interest does not accrue on all the loans.
Availability	The servicer must grant you a deferment if you meet its eligibility criteria and have deferment time available readily.	Usually, your servicer decides whether to grant you a forbearance.
Credit impact	Student loan deferment - has no impact on credit.	Student loan forbearance - has no impact on credit.

The best option - Deferment or Forbearance

Deferment

Just in case you need to take a break from payments, student loan deferment is a better option than the forbearance. To qualify for a deferment, the following will be considered:

Attending school at least half the time.
Being unemployed for unemployment deferment.
Receiving state or federal assistance
Earning a monthly income of less than 150% as per the state’s poverty guidelines.
Being on active military duty or in the Peace Corps.
Undergoing treatment for cancer.

Student loan deferment can make sense if you have subsidized federal student loans or the Perkins loans. These loans don’t accrue interest during the time of the deferment, so the amount you owe when the deferment ends will be the same as when it begins.

If your financial challenges are temporary and you don’t qualify for a deferment, forbearance of loan is the best option to go for.

Forbearance

If your financial challenges are temporary and do not qualify for a deferment, forbearance is the best option for you. Placing your loans in forbearance would always allow you to put the money from your student loan payment toward your other bills and that is when you can resume repayment. Even with the additional interest costs, forbearance would still be less expensive compared to other options, like taking out a payday loan or personal loan.

Income-driven repayment

If you’re still debating between deferment forbearance because you can’t afford your federal student loan payments for a longer-term, you can always go for an income-driven repayment plan instead. Income-driven plans generally tie the monthly payments to your earnings, and payments can be as small as $0. And while paying, paying less can also cause interest to grow, income-driven repayment has the added benefit of forgiveness after 20 or 25 years of your repayment of the loan.