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Deferment vs. Forbearance (Which Is Right for Your Student Loans?)

Deferment is a safer choice than forbearance if you apply, but neither is a long-term remedy.

When you can't afford to cover the student loans, deferment and forbearance are two options. The only distinction is that forbearance often extends your debt, while deferment on some forms of government loans would be interest-free.

When deciding between deferment and forbearance, your personal condition will determine which option is best for you:
  • Deferment: If you have discounted federal student loans or Perkins loans and are unemployed or facing serious financial distress, this is usually a safer option.
  • Forbearance: It's usually preferable if you don't apply for deferment because the financial difficulties are just temporary.

Both solutions will help you stop defaulting on your student loans, but none is a long-term alternative. Instead of pausing repayment, try enrolling in an income-driven repayment plan if you don't expect the financial condition to change.

Repayment options for loans in default When federal student loans default, income-driven reimbursement, deferment, and forbearance are no longer options. Loan restructuring and consolidation are two options for getting these loans back on track. However, this is not the case for private loans.

When private student loans default, recovery opportunities are more restricted. When you won't be able to cover your mortgage in full, you might need to consult with a student loan counselor on a student loan settlement or even file for bankruptcy.

A lawyer will also tell you that the time of limitations on your student loans has run out, removing the possibility of being sued for past-due debt.

What is the difference between deferment and forbearance?

In certain main cases, deferment and forbearance on federal student loans equate.

Length

Deferment: Length varies by deferment type; some last three years, while others are available as long as you qualify.
Forbearance: No more than 12 months at a time, with no set maximum for most federal loans.

Qualifications

Deferment: Tied to a qualifying event like being unemployed or enrolled in school at least half time.
Forbearance: A specific qualifying event is usually not necessary.

Application process

Deferment:Different deferments have different forms. Send the correct one and any necessary documentation to your student loan servicer.
Forbearance: There is a single “general forbearance” form, though servicers can also grant forbearance over the phone.

Interest accrual

Deferment: Interest does not accrue on subsidized federal student loans and Perkins loans.
Forbearance: Interest accrues on all loans.

Availability

Deferment: Your servicer must grant you a deferment if you meet its eligibility criteria and have deferment time available.
Forbearance: It’s usually your servicer’s decision whether to grant you forbearance, though forbearance is mandatory in some instances.

Credit impact

Deferment: Student loan deferment has no impact on your credit.
Forbearance: Student loan forbearance has no impact on your credit.

Log in to your studentaid.gov account if you're not sure what kind of federal student loans you have. Look at loans with the terms "Perkins" or "subsidized" to see which ones won't accrue interest during the deferment period.

If you've been behind on installments but haven't yet defaulted on your debt, both deferment and forbearance will be used to help you catch up.

Deferment vs. forbearance for private student loans

If you're in the military or enrolled in training, most private loans have deferment plans. Many that have forbearance usually do so for a period of at least a year. Despite their separate terms, deferment and forbearance for private student loans work in the same way: interest accrues at all times, and you're still liable for paying it. It's a smart way to avoid interest ballooning if your lender allows you to make interest payments whilst you're still in school.

Should you choose deferment or forbearance?

Student loan deferment is a safer choice than forbearance if you need to stop making payments. You must, however, meet the requirements for a deferment. You can do so if you meet the following criteria:
  • Attending school at least half time.
  • Being unemployed.
  • Receiving state or federal assistance — for example, through the Supplemental Nutrition Assistance Program or Temporary - Assistance for Needy Families.
  • Earning a monthly income of less than 150% of your state’s poverty guidelines.
  • Being on active military duty or in the Peace Corps.
  • Undergoing treatment for cancer.

If you have preferential federal student loans or Perkins loans, deferring your payments makes sense. Since these loans don't accrue interest during deferment, the balance you repay at the end of the period will be the same as it was at the start. It's a real reprieve from your debt. If you don't apply for a deferment and expect your financial difficulties to be short-term, forbearance might be a good option for you.

Consider the following scenario: You were in a car crash and now have a huge hospital bill to face. You don't have enough money right now to pay this extra payment and your other bills, but you will soon. There is no deferment available in this case, so you might place your loans on hold for a while. "Forbearance can make sense for you if you don't apply for a deferment and consider your financial difficulties to be temporary."

If you put the mortgage in forbearance, you will use the funds from your student loan interest to pay down other debts before returning to payments. Although with the higher interest rates, forbearance is expected to be less costly than such alternatives such as a payday loan or personal loan.

Calculate the cost of deferment vs. forbearance

When you have unsubsidized loans, forbearance and deferment will always increase your debt. Calculate how much these options would add to your bank account. 

Consider income-driven repayment instead

If you can't afford the federal student loan payments long term and are considering deferment vs. forbearance, apply for income-driven repayment instead.

Monthly contributions on income-driven contracts are linked to your wages, and payments may be as low as $0. Although spending less will increase interest, income-driven repayment has the additional advantage of redemption after 20 to 25 years.

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