Forbearance vs. Deferment on Student Loans

Last Updated: October 18, 2021 by Melanie Hanson

Deferment and forbearance are both types of temporary debt relief where student loan payments are reduced or postponed. Deferment is widely available at 0% interest to the borrower and is usually the preferred option.

Student Loan Deferment vs. Forbearance
Deferment Forbearance
Federal Definition A temporary postponement or reduction in student loan payments, usually at 0% interest to the borrower A temporary postponement or reduction in student loan payments at the regular interest rate
Qualifying Loans Only subsidized loans and subsidized portions of loans qualify for 0% interest deferment Any federal student loans that do not qualify for deferment
Availability Mandatory Mandatory & discretionary/general
Term Length 3 months to 3 years (no cumulative limit) 1 month to 1 year (3 years cumulative limit)

Student Loan Deferment

The key difference between deferment and forbearance is interest accrual, or rather, who pays for the accrued interest. Any federally subsidized loans in deferment essentially have a 0% interest rate; interest continues to accrue during the period, but interest payments are subsidized by the federal government. Unsubsidized loans, however, continue to accrue interest, which is then capitalized at the end of the deferment period.

Once you meet the requirements to qualify for a deferment, your loan servicer cannot turn down your request. Sometimes deferment is automatic. In any case, student borrowers are responsible for ensuring any deferment for which they qualify is active.

The U.S. Department of Education (ED) provides official deferment request forms on its website. A link to each form appears alongside its corresponding entry.

Grouped Bar Graph: Federal Student Loan Dollars in Deferment or Forbearance, values from each year's second fiscal quarter, from 2018 ($121 bilion and $111 billion in deferment and forbearance, respectively) to 2021 ($120 billion and $938 billion in deferment or forbearance, respectively)

In-School Deferment

In-school deferment is for students enrolled at least half time in a qualifying postsecondary program. If you apply for this type of deferment, you may also have the option of a six-month grace period following graduation, withdrawal, or after your enrollment hours fall below half time.

Subsidized loans and subsidized portions of loans – including Direct Loans, Stafford Loans, and the subsidized portions of Consolidation & Perkins Loans – may be deferred at 0% interest. All other loans are deferred with normal interest accrual.

With this type of deferment, you may opt to make interest payments during the deferment. PLUS loans do not necessarily include a grace period, but you may request a grace period that allows you to defer payment on a PLUS loan for up to six (6) months after graduation or withdrawal.

Read or print a copy of the official In-School Deferment Request form.

Cancer Treatment Deferment

Student borrowers undergoing cancer treatment are not expected to make student loan payments and may apply for deferment. The application requires either a physician’s signature or documentation from a medical doctor or osteopath legally authorized to practice medicine; that documentation must include your name, the dates or expected dates of the start and end of your treatment, as well as your physician’s name and contact information.

You may apply for this deferment at any time, even if you have already begun treatment. Any loans that are ineligible for this type of deferment may be placed under mandatory forbearance. Deferment periods are limited to 12 months but may be extended following certification from a physician.

Read or print a copy of the official Cancer Treatment Deferment Request form.

Military Service & Post-Active Deferment

Student borrowers who serve in the military may request one or both of these deferment options. Each deferment includes at least six (6) months of deferment following active duty.

Military Service Deferment begins on the date you begin performing the service that qualifies you for deferment; it ends 180 days after completion of your qualifying military service.

Post-Active Duty Deferment begins the day your qualifying military service ends and lasts up to 13 months. This type of deferment includes the 180-day period after your complete your qualifying military service, meaning you are limited to 13 months of deferment following active duty (as opposed to 13 months plus 180 days). You may also lose eligibility if you enroll in an eligible school at least half time during this period.

Read or print a copy of the official Military Service and Post-Active Duty Deferment Request form.

Economic Hardship Deferment

This type of deferment covers many types of economic hardship, including financial emergencies, insolvency, and certain types of low-income work. Volunteering with the Peace Corps, for example, qualifies as economic hardship.

Deferment may be available if you are unemployed or working less than 30 hours per week and looking for full-time work.

You may also file for deferment if you fall within certain income guidelines. For example, if you receive state or federal social assistance, such as Supplemental Nutrition Assistance Program (SNAP), or your monthly income is less than 150% of your state’s poverty guidelines, you may be eligible for student loan deferment.

The maximum cumulative eligibility for this type of deferment is 36 months per loan program. If you think you need a longer deferment, please refer to the ED’s income-based repayment plans.

Poverty Guidelines for the 48 Contiguous States & D.C.
Persons in Household Poverty Guideline 150% Poverty Limit
1 $12,880 $19,320
2 $17,420 $26,130
3 $21,960 $32,940
4* $26,500 $39,750

*Add $4,540 to the poverty guideline for each additional person per household.

Other Types of Deferment

Many other scenarios, such as enrollment in a Graduate Fellowship program, may qualify you for loan deferment.

For example, you may apply for up to 36 months of Temporary Total Disability deferment. You may also qualify for Rehabilitation Training deferment, which is for individuals with disabilities in full-time rehabilitation programs.

To download any of these forms or those linked above, visit the repayment forms library available on the ED website.

If you think you may qualify for deferment but aren’t sure which option to request, the ED website includes a form navigator with a checklist of common borrower issues to guide you to the correct form(s).

Student Loan Forbearance

While your student loan payments are reduced or postponed, interest will continue to accrue at the regular rate. You may pay the interest as it accrues. If not, the interest will sometimes (but not always) be capitalized at the end of the forbearance period.

For example, if you don’t pay the interest on a Direct Loan or Federal Family Education Loan in forbearance, the unpaid interest will be capitalized and added to your loan’s principal balance. Unpaid interest on a Perkins Loan, however, is never capitalized.

In most cases, forbearance is not automatic, and you must submit a form request to your student loan servicer in order to qualify. An exception to the rule would be the mass forbearance that was put in place during the COVID-19 pandemic. This was a rare case where forbearance did not include interest accrual.

Grouped Bar Graph: Number of Borrowers with Loans in Deferment & Forbearance, values from each year's second fiscal quarter, from 2018 (3.7 million and 2.7 million borrowers in deferment and forbearance, respectively) to 2021 (3.3 million and 23.2 million borrowers, respectively)

Mandatory Forbearance

Loans that do not qualify for deferment may be eligible for mandatory forbearance. As with deferment, if you qualify for a mandatory forbearance, your loan servicer is required by federal law to grant your request.

The CARES Act and subsequent mass forbearance of student loan debt would qualify as mandatory forbearance, meaning a federal loan servicer could not deny your right to postponed payments.

AmeriCorps Service

If you receive a national service award while serving with AmeriCorps, you may be eligible for mandatory student loan forbearance for as long as you continue to serve in the position for which you received the award.

While interest continues to accrue, the Corporation for National and Community Services may cover the cost of interest during your forbearance if you have also won the Segal AmeriCorps Education Award.

National Guard Duty

Only certain types of National Guard duty may qualify. You must be active on the order of a governor, and you must not be eligible for military deferment. You may also be eligible if you were activated no more than six (6) months after your most recent postsecondary enrollment.

Applicants must complete an official mandatory forbearance request form available on the U.S. Department of Education website. Applicants use the same form as Medical or Dental Internship/Residency and Department of Defense Student Loan Repayment Program Forbearance applicants.

Read or print a Mandatory Forbearance Request form.

Medical or Dental Internship or Residency

You may qualify for student loan forbearance while you complete an internship or residency in the medical or dental fields. The program must be a requirement for professional practice or service or must culminate in a degree or certificate awarded by an institution of higher education, a hospital, or a health care facility that offers postgraduate training.

You may only be approved for up to 12 months of forbearance at a time. A partial forbearance is an option, as well.

Student Loan Debt Burden

If your total monthly loan payments, including those for all federal loans you received, are 20% or more of your monthly gross taxable income, you may be eligible for up to three (3) years of mandatory forbearance.

The three-year limit is designed to steer borrowers toward a revised repayment plan, which is a better solution in the long term. Student loans that are federally protected may be eligible for any of several income-based or income-sensitive repayment plans.

Teacher Loan Forgiveness

You may be eligible for forbearance if you are actively pursuing teacher loan forgiveness. In other words, you must currently perform teaching services that qualify you for student loan forgiveness. If you discontinue these services, you no longer qualify for this type of forbearance.

Read more about teacher loan forgiveness, requirements, and eligibility.

Department of Defense Student Loan Repayment Program

If you are performing services that qualify you for partial repayment of your student loans under any Department of Defense Student Loan Repayment Program, you may qualify for mandatory forbearance.

Under a DoD repayment plan, the federal government repays part of your student loans. This type of forbearance is approved for up to 12 months at a time.

Discretionary Forbearance

Discretionary or general forbearance is not guaranteed or protected by law. In other words, it is approved at your loan servicer’s discretion.

Loan servicers may approve up to 12 months of general forbearance at a time and no more than three (3) years total for the life of the loan. Direct Loans, FFEL, and Perkins Loans are eligible for general forbearance.

Financial Difficulties

You may request a general forbearance due to financial difficulties that do not qualify you for deferment or mandatory forbearance.

Financial difficulties may include a sudden loss of income or a significant, unexpected bill. Because this type of forbearance is at the loan servicer’s discretion, its scope varies. Borrowers may be approved on a case-by-case basis.

Medical Expenses

While it may fall under the category of financial difficulty, loan servicers give special consideration for medical expenses.

Medical bills that are sudden, substantial, and nonrecurring are a good reason to seek forbearance. For medical expenses that are expected to repeat over the long term, you may use this type of forbearance while you explore more long-term solutions, such as a revised repayment plan.

Change in Employment

A change in employment may mean you changed employers or that your current job description has changed. If you work fewer hours or at a decreased wage, you may be eligible for forbearance. A loan servicer will not, for example, grant a forbearance if the change in employment is that you earned a promotion or increased income (unless additional circumstances somehow reduce your take-home pay).

Though your earnings might not dip low enough to warrant an economic hardship deferment, a sudden change in income can impact your monthly budget, including your ability to repay debts. This type of forbearance may be useful while you restructure your monthly budget to allow for the new income.

Others at Lender Discretion

Individual loan servicers may approve forbearances for other reasons at their discretion. If you are affected by a natural disaster, for example, you may request a forbearance.

Read or print a General Forbearance Request form.

Private Student Loan Deferment vs. Forbearance

Deferment or forbearance is more difficult to obtain with a private lender. Private student loans are not protected by the same legislation that regulates the repayment of federal loans. Any type of deferment or forbearance on private student loans is entirely at the discretion of the private lender or loan servicer.

Note that private lenders do not necessarily use the same definitions of deferment and forbearance as the ED. As a rule, interest continues to accrue whenever a private lender does authorize deferment or forbearance. Rules vary among lenders, however. The Consumer Financial Protection Bureau recommends contacting your lender or loan servicer as early as possible to explore your options.

Alternatives to Deferment & Forbearance

Most financial experts warn against forbearance and, to a slightly lesser extent, deferment. In both cases, the borrower is not actively decreasing their debt; ideally, your debt should consistently decline.

Deferment and forbearance may be useful in financial emergencies. In such cases, however, there are other options that may be worth exploring.

For example, an income-based repayment plan (IBR) scales your minimum monthly payment to a certain percentage of your income. With an IBR or similar income-sensitive repayment plan, you continue to make payments with the goal of actively reducing your debt. Once you’ve consistently made qualifying payments for a certain period (usually 10 years), you may be eligible for a full or partial discharge of your remaining student loan debt.

For more options, view the ED’s form navigator, which includes a checklist of common borrower issues to help you find the right option for you.

Sources

  1. U.S. Department of Education (ED) Office of Federal Student Aid (OFSA), Manage Loans: Understanding Student Loan Repayment
  2. Consumer Financial Protection Bureau, Student Loans
  3. U.S. Department of Health and Human Services, 2021 Poverty Guidelines
  4. Great Lakes Educational Loan Services, Postponing Your Federal Student Loan Payments
  5. AmeriCorps, Forbearance Overview