Student Loan Forbearance vs. Deferment – Repaying student loans is a difficulty most students often have after they graduate and their loan repayment term begins. To make student loans more affordable to pay, applying for student loan forbearance or deferment is a good idea. These processes help you to temporarily freeze your loan payments while you get a job or become stable. While these two are good, what are the differences between student loan forbearance and deferment?
One key difference between these two processes is that student loan forbearance accumulates your interest rates during the waiting period while deferment charges no interest in most cases. Aside from these, they both postpone student loans for a short period while the student gets financially stable. These two processes are similar to each other in some ways, but there are differences between them.
Depending on which you qualify for, they serve borrowers in different ways. However, before selecting from either of these two processes to make your loan repayment easier. It is important to be aware of the differences between them to help you better understand how they work and what makes them different from each other.
What is Student Loan Forbearance and Deferment?
The first difference between these two processes is their definitions. Understanding what they mean will help you make the right decision for your student loan. However, the following are the definitions of these two processes as well as how they work:
Student Loan Forbearance
Student loan forbearance allows borrowers to freeze their student loan payments for about 12 months within 3 years. It accumulates the interest rates on your loan during the waiting period offered, and at the end of the waiting period, this accumulated interest will be added to your loan balance.
Because of this, the borrower takes a longer time to repay the loan. However, there are two types of student loan forbearance: general forbearance and mandatory forbearance.
- General forbearance is granted at a borrower’s loan servicer’s discretion. Borrowers may be eligible to apply for this forbearance if they have financial hardship, medical expenses, a change of job, or any other difficulties.
- Mandatory forbearance is granted by the loan servicer if the borrower is enrolled in a dental. Or medical internship or residency, qualifies for the U.S. Department of Defense Student Loan Repayment Program, serves in the AmeriCorps, qualifies for teacher loan forgiveness, or if the borrower channels more than 20 percent of their income to federal student loans.
Student Loan Deferment
This process also pauses student loan repayments, but it is offered with more perks than forbearance. Deferment sometimes offers a longer time frame than forbearance, and it does not accumulate interest during this waiting period.
It does not accumulate interest on subsidized Federal Stafford Loans, the subsidized portions of Direct Consolidation Loans. Also, Direct Subsidized Loans, and FFEL Consolidation Loans. This means you do not need to bother about your loan interest rates piling up while you try to get back up financially.
Student Loan Forbearance vs. Deferment
Deferment on student loans is tied to one qualifying event like financial hardship or returning to school for at least half-time. While forbearance is tied to events leading to loss of finances or income. Aside from these, the table below displays other differences between student loan forbearance and deferment.
| Forbearance | Deferment | |
| Length | Maximum of three years | Depends on deferment type |
| Qualification Requirements | Mandatory Forbearance: Medical residency, registration for AmeriCorps, National Guard, etc. General Forbearance: financial difficulties and other difficulties your loan servicer accepts. | Cancer treatments, economic hardship, unemployment, military service, etc. |
| Interest Accumulated | It does not accumulate interest. | It accumulates and capitalizes interests. |
| Credit Impact | It does not affect your credit score but will be stated in your credit history. | It will not affect your credit score, but it will be indicated in your credit history. |
Depending on which of the two you choose, these processes do not work the same way.
Student Loan Forbearance and Deferment: Which is Best for Me?
Student loan deferment is usually the best option if you qualify for it because it allows you to pause your loan payment longer than forbearance will. It also does not accumulate interest for borrowers with subsidized or Perkins loans.
In cases where you are facing a tough financial problem and you do not qualify for deferment, forbearance is an alternative option to consider. However, be sure to confirm whether you qualify for forbearance or deferment before taking the next step.
