Understanding Deferment and Forbearance Options

Managing student loans or other types of debt can be challenging, especially during financial hardship. Fortunately, deferment and forbearance options provide temporary relief by allowing borrowers to pause or reduce payments. Understanding the differences between these options can help you make informed financial decisions.

1. What Is Deferment?

Deferment is a temporary suspension of loan payments, typically granted for specific reasons such as unemployment, economic hardship, military service, or enrollment in school.

Benefits of Deferment:

• Interest may not accrue on subsidized loans during deferment.
• Helps borrowers avoid default while managing financial difficulties.
• Available for federal student loans and some private loans.

Common Types of Deferment:

• In-School Deferment – Available for students enrolled at least half-time.
• Unemployment Deferment – For borrowers actively seeking employment.
• Economic Hardship Deferment – For those facing severe financial difficulty.

2. What Is Forbearance?

Forbearance allows borrowers to temporarily reduce or pause their loan payments, usually for a period of up to 12 months. However, interest continues to accrue on all types of loans during forbearance, which can increase overall debt.

Benefits of Forbearance:

• Provides short-term relief if deferment is not an option.
• Prevents loan default while managing financial strain.
• Available for federal and private loans, subject to lender approval.

Common Types of Forbearance:

• General (Discretionary) Forbearance – Granted at the lender’s discretion for financial hardship or illness.
• Mandatory Forbearance – Required to be provided under specific conditions, such as participation in medical residency or National Guard duty.

3. Key Differences Between Deferment and Forbearance

Feature	Deferment	Forbearance
Interest Accrual	No (on subsidized loans)	Yes (on all loans)
Loan Types Covered	Federal & Some Private	Federal & Private
Approval Required	Yes	Yes
Duration	Varies (up to 3 years for some cases)	Typically up to 12 months

4. Choosing the Right Option

Selecting between deferment and forbearance depends on your financial situation. If you have subsidized loans, deferment is often the better choice because interest does not accrue. However, if deferment is unavailable, forbearance can still provide temporary relief.

Before opting for either, consider:

• Exploring income-driven repayment plans to lower monthly payments.
• Understanding long-term costs, as forbearance increases total loan repayment amounts.
• Checking eligibility for deferment to maximize benefits.

5. How to Apply

• Contact Your Loan Servicer: Begin by reaching out to your lender to discuss available options.
• Submit Required Documentation: Applications typically require proof of financial hardship, unemployment, or enrollment status.
• Review Terms and Conditions: Understand interest policies and repayment expectations before committing.

Final Thoughts

Deferment and forbearance are valuable tools for managing debt during financial difficulty. While they offer temporary relief, borrowers should carefully assess their long-term financial impact. Exploring alternative repayment strategies and staying informed about loan options can lead to better financial stability.