Deferment and forbearance are temporary pauses on federal student loan payments, allowing borrowers to stop making payments due to financial hardship, unemployment, or other qualifying conditions. Deferment typically halts interest accrual on certain loans, while forbearance allows a pause but lets interest continue to accumulate.
These tools are designed to prevent default during periods of economic strain. They apply only to federal student loans-not private ones-and require formal application through the U.S. Department of Education's student aid portal or a loan servicer. Borrowers must reapply periodically if the pause extends beyond the initial term.
For example, a recent graduate facing job loss may qualify for deferment based on unemployment. A teacher in a low-income school district might qualify for a Public Service Loan Forgiveness (PSLF)-related deferment. Both scenarios allow payment suspension without immediate penalty-but outcomes differ depending on the option chosen.
Deferment and forbearance both allow borrowers to temporarily stop repaying their federal student loans. However, they differ in eligibility, duration, and impact on interest. Deferment is generally more favorable because it stops interest from accruing on Direct Subsidized Loans, Federal Subsidized Stafford Loans, and certain other federally insured loans.
Forbearance, by contrast, permits a pause in payments but allows interest to continue accruing-even on subsidized loans. This means the unpaid interest gets added to the principal balance, increasing the total amount owed. The average borrower in forbearance sees their loan balance grow by 6-8% annually due to compounding interest, according to the Consumer Financial Protection Bureau (CFPB).
Both options last up to 12 months initially. Deferment can be extended under specific circumstances such as continued enrollment, unemployment, or economic hardship. Forbearance may be granted multiple times, but borrowers cannot exceed three years of total forbearance over the life of the loan.
There are several types of deferment and forbearance, each with distinct requirements. The most common forms include:
| Type | Eligibility | Interest Accrual | Max Duration |
|---|---|---|---|
| Unemployment Deferment | Currently unemployed and actively seeking work | None on subsidized loans | Up to 12 months; renewable |
| Economic Hardship Deferment | Income below 150% of the poverty level or receiving public assistance | None on subsidized loans | Up to 3 years total |
| Temporary Forbearance | Financial difficulty not meeting deferment criteria | Yes, on all loan types | 12 months; renewable up to 3 years |
| Extended Forbearance | Monthly payments exceed 20% of gross income | Yes, on all loans | Up to 12 months; limited renewals |
The CFPB reports that nearly 40% of borrowers who applied for forbearance did so due to unexpected medical expenses or sudden job loss-not long-term financial planning. Many applicants assume forbearance is free, but it often increases long-term costs.
A key distinction missed by many: deferment is not automatic. You must apply through your loan servicer or the Federal Student Aid website. Forbearance requires a form and documentation of financial hardship. Failure to submit paperwork on time results in reinstated payments and potential late fees.
Many borrowers believe deferment and forbearance are permanent solutions or that they don't affect credit scores. Neither is true. These are temporary measures, and missing payments after the pause ends can lead to delinquency and credit damage.
Another widespread error: assuming forbearance protects the loan balance. In reality, interest continues to accrue and capitalizes-meaning it gets added to the principal. A $20,000 loan in forbearance for 12 months with 5% interest grows to $21,025, even if no payments were made. That extra $1,025 increases monthly payments later.
I once reviewed a case where a borrower used forbearance three times over five years. After the final pause ended, their balance had increased by 22% due to compounded interest. They had expected to resume payments at the original amount. Instead, they faced higher monthly payments and longer repayment timelines.
Use deferment when you qualify for a reason that halts interest, especially if you have subsidized loans. It's ideal for students returning to school, military service members, or those experiencing documented financial hardship. Deferment preserves the original loan balance and avoids interest growth.
Choose forbearance only when you don't meet deferment criteria but still need a pause. It's useful for short-term emergencies-like a medical crisis or temporary job loss-where you expect to return to stable income within a year. But avoid using it repeatedly; each extension adds to the total cost.
For example, a nurse earning $65,000 annually lost her job during the pandemic. She qualified for economic hardship deferment, which paused her $350 monthly payment on a $30,000 Direct Unsubsidized Loan. Interest stopped accruing, and she resumed payments at the same balance after six months. Had she used forbearance instead, her balance would have grown by $750 in interest alone.
Deferment and forbearance are not interchangeable. Knowing which one to use-and when-can save thousands in interest and prevent long-term financial strain. Always assess your loan type, current income, and future outlook before applying.