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Deferment vs Forbearance

Deferment Vs. Forbearance: What’s the difference between the two?

Deferment and forbearance are similar in that they both allow you to temporarily postpone, or even reduce, your monthly federal student loan payments. However, the difference between the two is found in how the interest on the loans accumulates.

  • Deferment: Interest does not accrue on some of your Direct loans.
  • Forbearance: Interest does accrue on all Direct loans.

What Is A Deferment?

Deferment is a period during which repayment of the principal and interest of your loan is temporarily delayed. This can be an excellent option if you are going through a financial hardship or return to school. The key benefit of deferment is that, depending on the type of loan you have, you might not be responsible for paying the interest that accrues during the deferment period.

When You Can Get A Deferment

According to StudentAid.gov, deferments might be available if you are:

  • “undergoing cancer treatment;
  • experiencing an economic hardship;
  • in a graduate fellowship program;
  • enrolled in school at least half-time;
  • performing qualifying military service;
  • a post-active duty service member;
  • a Parent PLUS borrower with a student enrolled in school;
  • enrolled in a rehabilitation training program;
  • unemployed.”

What Is A Forbearance?

Forbearance allows you to stop making payments or mitigate your monthly payment for up to 12 months. Interest continues to accrue on your subsidized and unsubsidized loans, including all PLUS loans. There are two types of forbearances—general and mandatory. With general forbearance (often referred to as discretionary forbearance), your loan servicer decides whether to grant forbearance or not. It can be requested for financial hardships, medical expenses, or changes in employment. Conversely, for mandatory forbearance, if you identify the eligibility criteria, the loan servicer is required to grant the forbearance.

When You Can Get A Forbearance?

According to StudentAid.gov, deferments might be available if you are:

  • “experiencing financial difficulties, such as medical expenses or changes in income;
  • serving in AmeriCorps;
  • performing service that would qualify you for partial loan forgiveness through the U.S. Department of Defense;;
  • working in a medical or dental internship or residency;
  • serving in the National Guard;
  • have student loan payments that are high in relation to your income; or
  • working as a teacher to qualify for Teacher Loan Forgiveness.”

How To Apply For A Forbearance or Deferment?

It’s best to contact your servicer if you are experiencing a financial hardship.

Regardless of which option you choose, it is crucial to continue making payments until your loan servicer approves your request. Failure to do so can lead to delinquency or default, which brings severe consequences, including damage to your credit score.

Visit our Servicer Contact Information page for addresses and phone numbers for all of the federal student loan servicing companies.

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