Deferment or Forbearance?

A student loan deferment or forbearance allows you to temporarily stop or reduce federal student loan payments. This is meant to assist people who are temporarily impacted by a variety of situations. These reasons can include loss of employment, medical, natural disaster and others.

The duration of this temporary relief is also different so review with your servicer carefully. The terms are defined as:

Deferment – A temporary postponement of payment on a loan that is allowed under certain conditions and during which interest does not accrue on Direct Subsidized Loans, the subsidized portion of Direct loans and other loan types.

Forbearance – A period during which your monthly loan payments are temporarily suspended or reduced. Your lender may grant you forbearance if you are willing but unable to make loan payments due to certain circumstances.

Depending on circumstances, you may be able to receive a deferment or forbearance which can allow you to temporarily stop making your monthly payments or to temporarily reduce the monthly amount of your Federal student loan payments. Taking one of these actions may help avoid defaulting on monthly payments.

Try to work with your loan servicer to apply for deferment or forbearance. Make sure to keep making payments until one of these options is in place. Failure to do so may put you in default and prevent you from receiving these options. Your servicer will alert you if they need additional information or if you do not qualify.

At times, you may need to submit documentation for deferment or forbearance. If you choose to get help preparing these documents, be sure you know the price before you commit. Some documentation preparation services will first explore your situation, so they can fee fix. It is best to get a price first and if the company resists providing the price first, go to the next one.

What is the difference between Deferment and Forbearance?

The main differences include:

• The way the monthly payment is impacted,
• The duration of the relief
• The way it affects the loan balance

Depending on the loan type, with a deferment, you may not be responsible for paying the interest that accrues during the deferment period. However, during the forbearance period, you are responsible for paying the interest that accrues on all of the different types of Federal student loans.

If you are responsible for paying interest on your loans during a deferment or forbearance, you have two options. You can pay the interest monthly during the period. You can allow the interest which accrues during the period to be converted (capitalized). This means the interest will be added to the balance of the loan when the period ends.