Can’t repay your education loan? Learn the critical difference between student loan deferment and forbearance, including how interest accrues, and decide which option is right for your situation.
Facing financial hardship is stressful, and a looming student loan payment can add to that anxiety. The good news is that the federal education loan system has powerful safety nets built in to help you through tough times. The two most important tools at your disposal are deferment and forbearance.
Both options allow you to temporarily pause your payments, but they work in very different ways—especially when it comes to interest. Understanding the difference between education loan deferment and forbearance is critical to making the choice that best protects your financial health and helps you avoid education loan default.
Editor’s Note (YMYL): This guide focuses on options for federal student loans. Private lenders (like Citizens Bank or SoFi) have their own policies, which are typically far less flexible and generous. Always contact your loan servicer directly to discuss your specific options.
The Core Concept: A Temporary Pause on Your Payments
Both deferment and forbearance are official agreements with your loan servicer that allow you to temporarily stop making payments (or make smaller payments) on your student loans without being considered delinquent. They are a crucial bridge to help you manage a short-term financial crisis and a primary way to prevent an education loan default. They are not a long-term solution for how to repay your education loan.
Quick View: Deferment vs. Forbearance at a Glance
The most significant difference between the two is how they handle interest.
| Feature | Education Loan Deferment | Forbearance |
| What is it? | A pause on payments for borrowers who meet specific, defined criteria. | A general temporary pause on payments, often when you don’t qualify for deferment. |
| How to Qualify | Must meet specific eligibility rules (e.g., unemployment, economic hardship, in school). | Often granted at the loan servicer’s discretion based on your financial difficulty. |
| How Interest is Handled (The #1 Difference) | The government pays the interest on your Direct Subsidized Loans. Interest still accrues on all other federal loans. | Interest accrues and is capitalized (added to your principal) on ALL federal loan types. |
| Which is Better? | Financially better, if you have subsidized loans and qualify for it. | A valuable safety net for everyone, but it can be more expensive in the long run. |
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A Deeper Look at Education Loan Deferment
Deferment is the financially superior option if you are eligible. You must apply through your loan servicer and provide proof that you meet one of the specific criteria, which include:
- Being unemployed or unable to find full-time work.
- Experiencing economic hardship.
- Being enrolled at least half-time in college or a career school.
- Serving in the Peace Corps or active duty military.
The key benefit is the interest subsidy. If you have a Direct Subsidized Loan (a type of subsidy education loan), the U.S. Department of Education will pay the interest that accrues during your deferment period. This means your loan balance will not grow.
A Deeper Look at Forbearance
Forbearance is a more general-purpose tool. It’s for when you are struggling to make payments but do not meet the strict criteria for a deferment.
The major drawback is capitalized interest. During forbearance, interest accrues on all of your loans, regardless of type. At the end of the forbearance period, any unpaid interest is added to your principal loan balance. This means you will begin paying interest on a larger principal amount, increasing the total cost of your loan over time.
Frequently Asked Questions (FAQ)
How do I apply for deferment or forbearance?
You must contact your student loan servicer directly. They will provide you with the necessary forms and tell you what documentation you need to provide. These benefits are not automatic.
Does using deferment or forbearance hurt my credit score?
No. As long as your request is officially approved by your servicer, your account will be reported as current to the credit bureaus. It is a responsible way to manage hardship. What does hurt your credit score is missing payments without an approved pause.
What happens if I don’t use these options and just stop paying?
Simply stopping payment will lead to delinquency and, after about nine months, an education loan default. This has severe consequences, including significant damage to your credit score, wage garnishment, and loss of eligibility for any further financial aid.
Are there education loan forgiveness options that help with payments?
Loan forgiveness programs, like Teacher Education Loan Forgiveness, are typically end-of-service benefits and do not help with monthly payments while you are working toward them. However, income-driven repayment (IDR) plans can lower your monthly payment based on your income.
Summary: Making the Smartest Choice for Your Situation
When you can’t afford to repay your education loan, being proactive is key. The choice between deferment and forbearance comes down to two things: your eligibility and how interest is treated.
- Always apply for deferment first. If you qualify and have subsidized loans, it will save you a significant amount of money.
- Use forbearance as a powerful backup option. While it may cost you more in the long run due to capitalized interest, it is an essential tool to prevent the devastating consequences of an education loan default.
The most important step is to call your loan servicer before you miss a payment.
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