What Is The Difference Between Deferment and Forbearance?

The main difference between the two is that, while in deferment, you don’t have to pay the interest that accrues if you have certain types of loans. Specifically, you don’t have to pay interest on Direct Subsidized Loans, Subsidized Federal Stafford Loans, Federal Perkins Loans, and subsidized portions of Direct Consolidation Loans or FFEL Consolidation Loans.

Who Is Eligible for Deferment?

Overall, deferment is tailored to people who are having economic difficulties because, for example, they’re in school at least half-time, in the military, in another eligible post-graduate role, or can’t find a full-time job. Here are more details: You may qualify for deferment if you are enrolled at least half-time at an eligible college or vocational school, and if you’re in an approved graduate program, for six months after your enrollment ends.

Who Is Eligible for Forbearance?

There are two kinds of forbearance: mandatory and general. If you qualify for mandatory forbearance, your loan servicer is required to grant it to you. Depending on the type of loan you have, you may be eligible if you’re in a medical or dental internship or residency, serving in AmeriCorps or the National Guard, or working as a teacher and performing a teaching service that qualifies for teacher loan forgiveness. You may also qualify if your monthly student loan payment is at least 20% of your gross monthly income, for up to three years, again depending on the type of loan you have. Note: You can be granted mandatory forbearance for up to a year at a time. After that, you can request it again.

Forbearance vs Deferment for Student Loans: Which One Should You Choose?

If your loan type and circumstances allow you to, getting a deferment can be a no-brainer since it’ll allow you to get a break on interest during the deferment period. If you’ve already exhausted the maximum time for a deferment, or your situation doesn’t fit the narrow eligibility criteria, then it could make sense to apply for a forbearance. If your ability to afford your loan payments is unlikely to change anytime soon, or if you have private loans or federal loans that don’t qualify for a deferment or forbearance program, you may want to consider other solutions, such as an income-based repayment plan or student loan refinancing.

How Does an Income-Based Repayment Plan Work?

Another way to potentially reduce your federal student loan payment is to apply for an income-based repayment plan. The government offers four different plans that tie your monthly payment to your income and other factors, such as family size.

How Can Student Loan Refinancing Help?

For some borrowers, refinancing your student loans can be a good way to reduce your monthly payment or interest rate. Refinancing involves taking out a new loan from a private lender and using it to pay off your existing federal or private loans, effectively combining multiple loans into one.

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