If you’re having difficulty repaying your federal student loans, then you might want to consider a deferment or forbearance. These two temporary solutions allow you to stop making or, in some instances, to lower your monthly federal student loan payment. While both can be helpful solutions if you’re experiencing temporary hardship, they aren’t great long-term solutions because they can be costly, and if you aren’t careful, your loan balance could be higher when your deferment or forbearance period ends.
Before you apply, here’s some information that can help you decide if deferment or forbearance is the best option for you.
1. Should I choose a deferment or forbearance?
The two main differences between deferment and forbearance are
- the situations under which you may qualify, and
- whether or not you’ll be charged interest when you’re not making payments.
Most borrowers first apply for a deferment because it’s usually the best option and then if they aren’t eligible for it, their loan servicer (the organization that manages your student loan) may grant a forbearance.
See questions 2 and 3 for additional details.
2. Can I postpone my payments with deferment or forbearance?
Maybe. Getting a deferment or forbearance is about your situation and the reason you are having trouble making your loan payments. In general, you’ll request a deferment or forbearance because of a financial or economic hardship. Additionally, you may qualify if you are enrolled in school at least half-time, during or directly following a period of active duty military service, while you complete a medical or dental residency program, while you serve in the Peace Corps, or while you serve in a national service position for which you received a national service award (e.g., AmeriCorps). You’ll want to review a list of situations that qualify for deferment and the list of reasons you may request a forbearance or you can always contact your loan servicer for more information.
3. How could a deferment or forbearance cause my loan balance to increase?
Whether your loan balance increases depends on the type of federal student loans you have, whether you are requesting a deferment or a forbearance, and whether you make any required interest payments during this time. Let me explain.
With deferment, the federal government pays the interest that is charged during a deferment period for certain types of federal student loans. For those loans that the federal government does not pay the interest charges, such as unsubsidized loans and PLUS loans, interest continues to accrue (accumulate) during deferment. Any unpaid interest that accrues during your deferment period is added to your loan balance. This is called capitalization.
With forbearance, the federal government does not pay interest charges for any type of federal student loan—ever. So, while you can stop making payments or reduce your monthly payment amount for up to 12 months, interest continues to be charged on all of your federal student loans during a forbearance period. Again, any unpaid interest that accrues during this time will be added to your loan balance.
4. Should I postpone my payments with a deferment or forbearance?
Just because you qualify to postpone your payments with a deferment or forbearance, doesn’t mean you should. Why? Because any unpaid interest (discussed in the previous question) that accrues during deferment or forbearance periods may be capitalized. So when you start making your payments again—which you eventually must do—your loan balance may be higher than it was before you got a deferment or forbearance, which may cause your monthly payment amount to increase. For this reason, a deferment or forbearance may not be the best option for you. There are often better options available to help you make your monthly payment.
5. What are my other options?
Other options include changing your payment due date, switching repayment plans, or consolidating your loans. For example, just changing your repayment plan to an income-driven repayment plan could reduce your monthly payment to $0. Consolidating your loans could also lower your monthly payments by giving you up to 30 years to repay your loans. If you haven’t considered these options, you’ll want to review the options before you apply for a deferment or forbearance.
Ultimately, the decision to postpone or reduce your monthly student loan payment is yours, but for many borrowers it is absolutely necessary to keep a loan from going into default. Just proceed with caution and take some time to find out the best option for you and your financial situation. You can always contact your loan servicer to discuss the options. Your servicer will help you—free of charge!
You can find more information about deferment and forbearance, including the situations that may make you eligible at StudentAid.gov/deferment-forbearance.
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Lisa Rhodes is a writer at the Department of Education’s office of Federal Student Aid.