If you are having trouble keeping up with your federal student loan payments, two options to temporarily postpone payments are deferment and forbearance.
Deferment and forbearance allow you to pause monthly student loan payments for a time if you meet certain criteria. But they have some key differences.
This article explains what federal student loan deferment and forbearance are, the pros and cons of each, eligibility requirements, and how to apply if you need temporary payment relief.
What is the Difference Between Deferment and Forbearance?
The main differences between deferment and forbearance for federal student loans are:
- Eligibility – Deferment is based on specific hardship criteria. Forbearance is available to any borrower with a reasonable cause.
- Interest – No interest accrues on subsidized loans in deferment. Interest still accrues in forbearance.
- Length – Deferments are typically limited to 1-3 years. Forbearance can be 1-12 months at a time.
- Qualifying Loans – All federal loans are eligible for both options.
Deferment is better for those who meet the eligibility requirements since no interest builds on subsidized loans. Forbearance is a fallback option with more flexible criteria but less borrower benefit.
Both provide a way to temporarily postpone payments when needed, but the specific details differ.
What is Student Loan Deferment?
Student loan deferment allows you to temporarily stop making monthly payments on federal student loans for specific reasons for up to 3 years at a time. Some details on deferments:
- Must meet eligibility criteria based on hardship
- No interest accrues on subsidized loans during deferment
- Interest still accrues on unsubsidized loans
- Typically lasts up to 12 months initially but can be renewed
- Does not resolve delinquent or defaulted loans
Deferments provide borrowers who qualify with a break from payments and the benefit of paused interest accumulation on subsidized loans.
Student Loan Deferment Eligibility
To qualify for a federal student loan deferment, you must have an eligible Direct Loan, FFELP Loan, or Perkins Loan and meet one of the following eligibility criteria that cover the period deferred:
- Enrolled in college at least half-time
- Unemployment or inability to find full-time work
- Economic hardship, including Peace Corps service
- Active military duty service
Eligibility is based on documenting and meeting specific deferment conditions related to continuing education, military service, or financial hardship status.
You cannot receive a deferment simply for discretionary reasons – it must align with one of the authorized federal deferment programs.
Pros and Cons of Student Loan Deferment
Consider these advantages and potential disadvantages before pursuing deferment:
| PROS | CONS |
|---|---|
| Pauses payments for 12 months initially | Interest accrues on unsubsidized loans |
| Can renew deferment to extend postponement | Delinquent loans do not qualify |
| No interest accrues on subsidized loans | Repeated use can substantially increase costs |
| Provides time to improve finances and cash flow | Postpones repayment progress |
| Borrower remains in good standing | Cannot exceed 3 years of deferment generally |
| Simpler eligibility than income-driven plans |
Overall, deferment is the best short-term option if you can qualify and want to pause payments without falling behind. But use strategically in limited circumstances to avoid added costs over the long run.
How to Apply for Student Loan Deferment
Follow these steps to apply for and receive federal student loan deferment:
- Determine if you meet deferment eligibility criteria based on your loans, student status, and circumstances.
- Contact your student loan servicer to formally request a deferment and specify which deferment program you qualify for.
- Submit supporting documentation proving your eligibility as required.
- Continue making monthly payments until you receive confirmation that the deferment is approved.
- Interest will stop accruing on subsidized loans once the approved deferment takes effect.
Be sure to recertify any changes in your eligibility status during the deferment period. You will eventually need to apply for renewal to extend the deferment if still needed.
What is Student Loan Forbearance?
Student loan forbearance allows you to temporarily stop or reduce monthly payments for up to 12 months at a time, and renew if still needed, due to financial hardship or other issues. Details on forbearance:
- More flexible eligibility criteria based on hardship
- Interest accrues on all loan types
- Initially approved for up to 12 months at a time
- Can be renewed but generally limited to 36 months
- Resolves delinquent loans
Forbearance provides an option when payments are unaffordable short-term but does not provide the same borrower benefits as deferment.
Student Loan Forbearance Eligibility
Forbearance eligibility is more flexible than deferment. You may qualify for forbearance for reasons including:
- Financial difficulties in making payments
- Change in Employment
- Poor health
- Required medical or dental residency
- Student loan debt exceeds monthly income
Essentially any reasonable cause creating approved hardship can qualify you for forbearance, unlike deferment’s strict criteria. Forbearance also resolves delinquent federal loans.
Pros and Cons of Student Loan Forbearance
These are some key pros and cons of pursuing forbearance for your federal student loans:
| PROS | CONS |
|---|---|
| More flexible eligibility than deferment | Interest accrues on all loans |
| Pauses payments a year at a time | Generally limited to 3 years total |
| Can be renewed as needed | Not based on specific qualifying criteria |
| Resolves delinquent loan status | Higher long-term costs than deferment |
| Simple application process | Delays in repayment progress on loans |
While useful as a last resort, forbearance allows interest to accumulate, so avoid overusing it to keep costs down. Evaluate deferment or income-driven repayment first if possible.
How to Request Student Loan Forbearance
Follow these steps to pursue forbearance if needed for your federal student loans:
- Contact your loan servicer to request forbearance based on financial hardship or other eligible circumstances.
- Specify the reason for forbearance and the period desired when requesting it.
- Provide any supporting documentation on cause and duration if required by your servicer.
- Keep making payments until you receive confirmation that forbearance was approved.
- Interest will accrue on all loan types once the forbearance takes effect.
Renew forbearance before it expires if you still need short-term payment relief. Take action to improve circumstances allowing you to resume repayment progress when possible.
Is Student Loan Relief a Deferment or Forbearance?
The recent pandemic student loan payment pause provided by the CARES Act would be categorized as administrative forbearance since interest continued accruing but payments were not required.
While borrower advocates argued for deferment, this widespread relief based on the national emergency used forbearance in order to rapidly implement the payment suspension.
Since it applied to all federal loans automatically without application, was not tied to specific hardship criteria, and allowed interest buildup, the pandemic payment pause aligned more closely with forbearance parameters.
Conclusion
In Conclusion, while deferment and forbearance provide options for temporary federal student loan payment relief, both come with trade-offs.
Deferment is ideal for those who meet eligibility criteria to pause payments without interest accumulation.
Forbearance provides broader flexibility but increases costs.
Carefully evaluate the pros and cons before pursuing either short-term option and use strategically to avoid unintended long-term consequences.
Conduct due diligence upfront to determine if deferment or forbearance aligns with your financial situation and if alternatives like income-driven repayment may be better suited for lasting affordability.
Seek financial and legal advice before making any decision on any loan.
