Student Loan Debt Deferment and Forbearance: FAQ Guide

Student loan debt deferment and forbearance are two options borrowers have to temporarily delay their loan payments. Under specialized circumstances, student loan debt deferment or student loan debt forbearance allows borrowers to:

  1. Temporarily stop making federal student loan payments
  2. Temporarily reduce the amount of your federal student loan payments

Private lenders have different rules and regulations for deferment and forbearance. Private lenders need to be contacted directly for more specific information.

Now, read on for a detailed breakdown of the difference between deferment and forbearance.

Student Loan Deferment

What is student loan deferment?

Student loan deferment allows borrowers to temporarily pause paying back student loans, due to certain life circumstances. The maximum deferment period is typically up to 3 years. However, some deferments may be available for as long as the borrower qualifies.

What are the key criteria to qualify for a student loan deferment?

There are several criteria experts recommend you meet before attempting to qualify for a deferment, including:

  • Borrowers have subsidized federal loans or Perkins loans — these loans will not accrue interest during the deferment
  • You cannot afford to make any payment on their student loans
  • You expect to be able to restart repayment fairly soon

Other criteria for qualifying for a deferment include if the borrower is:

  • Attending school at least half time
  • Unemployed
  • Inactive military service during a war, national emergency or military operation
  • In the 13-month period following the end of active duty
  • Currently serving in the Peace Corps
  • Receiving state or federal assistance
  • Earning a monthly income of less than 150% of their current state’s poverty guidelines

What are other important details about student loan deferment?

  • Interest does not accrue for subsidized federal loans during deferment periods
  • Interest does accrue on unsubsidized loans during deferment periods

Student loan deferment is an option for?

Typically, deferment is an option for borrowers who:

  • Have subsidized federal student loans or Perkins loans
  • Are unemployed
  • Are dealing with a financial hardship

Final things to keep in mind?

“Student loan deferment can be bad — or at least expensive — if you have private or unsubsidized federal student loans…These loans accrue interest during deferment, and you’ll be responsible for paying it. If you don’t do this while the loan is in deferment, that unpaid interest will be capitalized, or added to your loan balance, when you enter repayment. Those extra costs may be worth it if the alternative is having your wages garnished or losing your tax refunds because of a student loan default,” writes Ryan Lane for NerdWallet.

Student Loan Forbearance

What is student loan forbearance?

Student loan forbearance allows borrowers to temporarily lower or stop their loan payments. Federal loan forbearance typically lasts 12 months. However, there is no maximum length. Additionally, many private lenders offer student loan forbearance. These forbearances are also typically for 12 months and have no maximum length. Due to interest accrual, student loan forbearance always increases the final amount the borrowers repays.

There are three kinds of forbearance:

  1. General forbearance
  2. Specific Federal Program/ Benefit forbearance
  3. Mandatory forbearance

What are the key criteria to qualify for a student loan forbearance?

There are several criteria experts recommend you meet before attempting to qualify for forbearance, including:

  • Borrowers do not qualify for deferment
  • Cannot currently pay their loans
  • Do not expect to wait long to restart repaying loans

There are also qualifications based on the type of forbearance:

  • General Forbearance – Borrower must be experiencing financial difficulties like unemployment, surprise medical expenses, or other financial issues.
  • Federal Program / Benefit Forbearance – “The program’s application may indicate that you have the choice to place your loans in administrative forbearance.”
  • Mandatory Forbearance – Qualifications for receiving mandatory forbearance of loans can include:
    • Being called upon for active military duty
    • Qualification for partial repayment under the U.S. Department of Defense Student Loan Repayment Program
    • Participation in a medical or dental internship or residency
    • Serving in Americorps
    • Serving in the National Guard (without qualifying for a military deferment)
    • Service that qualifies the borrower for Teacher Loan Forgiveness
    • Student loan payments exceeding 20% of monthly income

What are other important details you need to know about student loan forbearance?

  • During forbearance, interest continues to accrue on the loan.
  • This interest is then capitalized, or added to your principal balance.
  • Forbearance thus ends up increasing the total amount the borrower needs to pay back.

Student loan forbearance is an option for?

Typically, forbearance is an option for borrowers who:

  • Do not qualify for deferment
  • Are experiencing a temporary financial challenge

Final things to keep in mind?

Experts caution against turning to student loan forbearance.

“A student loan forbearance can offer temporary relief to struggling borrowers, and since it can be granted after just a phone call, it’s often the first tool borrowers turn to. But quite frequently, a forbearance only masks the problem, delays an inevitable default and leaves the borrower in a worse financial position,” writes Allesandra Lanza for U.S. News.

Other solutions

While both forbearance and student loan deferment are options to avoid default, garnished wages, or seized tax returns, experts warn against both.

Instead, The Office of Federal Student Aid recommends an income-driven repayment plan for two reasons. The first is if there are extenuating circumstances preventing loan payment for a longer period of time. The second is if “you are unsure when you will be able to afford to make your monthly loan payments again.”

Additionally, you can seek out employer student loan assistance through LoanGifting.

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