Quick answer

Deferment is a formal pause on required payments that, for certain federal loans (notably Direct Subsidized Loans), prevents interest from accruing during the break. Forbearance is a temporary reduction or suspension of payments granted by your loan servicer; interest continues to accrue on essentially all loan types while in forbearance. Both can prevent delinquency and default when used correctly, but forbearance is usually more expensive long term.

How each option works

  • Deferment: Available for qualifying federal loan borrowers who meet specific conditions (in-school, economic hardship, unemployment, certain military service). For Direct Subsidized Loans and some other federal loan types, the federal government pays the interest during deferment. Unsubsidized federal loans and most private loans generally continue to accrue interest during deferment unless your lender agrees otherwise (U.S. Dept. of Education) (studentaid.gov/manage-loans/repayment/deferment).

  • Forbearance: Can be discretionary (granted at the servicer’s discretion for short-term hardship) or mandatory (required under federal rules when you meet specific conditions). Interest accrues on all loan types during forbearance, and that interest may be capitalized (added to your principal) when the forbearance ends, increasing future monthly payments and total interest costs (U.S. Dept. of Education) (studentaid.gov/manage-loans/repayment/plans/deferment-forbearance; cf. Consumer Financial Protection Bureau) (consumerfinance.gov/ask-cfpb/what-is-forbearance-on-my-student-loans-en-1791/).

Who is eligible

  • Federal deferment: Specific categories such as enrollment at least half-time, economic hardship, unemployment, Peace Corps/military service, and certain rehabilitation or residency programs. Eligibility and documentation requirements vary by category and loan type.
  • Federal forbearance: Available for general financial hardship, medical expenses, changes in income, or other short-term qualifying issues. There are both discretionary and mandatory forbearances; mandatory forbearances must be granted if you meet the statutory criteria.
  • Private loans: Offerings vary widely. Many private lenders do not provide formal deferment; some offer forbearance or hardship programs but under different rules and durations. Always check your loan agreement and speak with your private lender.

Typical durations and renewals

  • Deferment lengths vary by type; many are granted in 6–12 month increments and can be renewed if you continue to qualify. Some deferments (like in-school) last as long as the qualifying condition continues.
  • Forbearance is commonly granted in shorter blocks (e.g., up to 12 months at a time for federal loans) and may be renewable. Excessive reliance on repeated forbearances can substantially increase your balance over time.

Cost comparison (example)

Illustration: $20,000 unsubsidized federal loan at 5.0% interest, paused for 12 months.

  • Forbearance: Interest accrues during the 12 months: $20,000 × 0.05 = $1,000 in interest. If you don’t pay that interest and it capitalizes at the end of the forbearance, your new principal becomes $21,000 and future interest is calculated on that higher balance.
  • Deferment (subsidized loan): If your loan is subsidized and qualifies for deferment, the government covers interest during the pause. Your balance stays $20,000 and you avoid the $1,000 in added interest. If your loan were unsubsidized and you received deferment, interest would still accrue unless you arrange to pay it.

This simple example shows how forbearance can meaningfully increase the total cost of borrowing if interest is allowed to accumulate and capitalize.

Common consequences to watch for

  • Interest capitalization: Interest that builds during deferment or forbearance may be added to your principal (capitalized), increasing future interest charges and monthly payments. Capitalization rules depend on loan type and the specific program; check your servicer’s notices or studentaid.gov for details (U.S. Dept. of Education) (studentaid.gov/manage-loans/repayment/plans/deferment-forbearance).
  • Longer repayment term and higher total cost: Paused payments extend the time you carry debt and usually raise total interest paid.
  • Impact on forgiveness and repayment credits: Not all paused periods count toward loan forgiveness programs. For example, time in forbearance generally does not count toward Public Service Loan Forgiveness (PSLF), while some periods of deferment may or may not qualify depending on program rules and loan type. Confirm specifics with Federal Student Aid and the PSLF program guidance (studentaid.gov/manage-loans/forgiveness-cancellation/public-service).
  • Credit reporting: Being in an approved deferment or forbearance generally prevents delinquency reporting while active. However, failing to secure approved relief or letting payments lapse before approval can trigger delinquencies that harm credit.

How to apply (step-by-step)

  1. Identify your loan type(s): federal subsidized, federal unsubsidized, PLUS, Perkins, or private loan. Your options differ by loan type. Check your account on studentaid.gov or contact your servicer.
  2. Contact your loan servicer: Request specific forms and instructions. Don’t rely on informal promises — get approvals in writing.
  3. Provide documentation: Typical documents include proof of school enrollment, unemployment benefits, income statements, physician letters, or military orders depending on the relief requested.
  4. Ask about interest and capitalization rules: Before you accept relief, ask whether interest will continue to accrue and whether it will be capitalized.
  5. Get a written confirmation of terms: This should state the start and end date, whether interest accrues, and whether the period counts toward any forgiveness programs.
  6. Re-evaluate regularly: If your situation changes, contact your servicer to switch to a lower payment plan (e.g., an income-driven repayment plan) or resume payments.

Alternatives and strategies to consider

  • Income-driven repayment (IDR) plans: Often a better option than forbearance because they lower monthly payments based on income and can preserve progress toward forgiveness under programs like PSLF when qualifying payments are made (studentaid.gov/manage-loans/repayment/plans/income-driven).
  • Short-term reduced payment: Ask your servicer if you can reduce payments rather than pause them entirely. Paying some interest each month prevents capitalization and reduces long-term costs.
  • Refinancing private loans: Private refinancing can lower interest rates, but you may lose federal protections, including eligibility for deferment, forbearance, or forgiveness. Carefully weigh trade-offs before refinancing federal loans.
  • Emergency budgeting and assistance: Explore employer benefits, state programs, or nonprofit borrower assistance before taking forbearance. See employer-related repayment options for additional help (FinHelp: Employer Student Loan Repayment Benefits and Their Effect on Forgiveness).

Real-world examples (short vignettes)

  • Case A (Deferment helped): A borrower with Direct Subsidized Loans lost a job and qualified for unemployment deferment for nine months. Because the loans were subsidized, the borrower avoided interest during the pause and resumed payments with the original principal balance.
  • Case B (Forbearance cost): A borrower in an unpaid medical residency used discretionary forbearance for 10 months. Interest accrued and capitalized at the end, increasing principal and monthly payments — extending the payoff timeline by years compared with continuing a small monthly payment.

Professional tips (based on practice)

  • In my practice advising more than 500 borrowers, I’ve found that borrowers rarely regret choosing an income-driven repayment plan over forbearance when they qualify. IDR keeps you in active repayment and can preserve eligibility for certain forgiveness programs.
  • If you need temporary relief, try to pay accrued interest while in forbearance to avoid capitalization.
  • Always document conversations with your servicer and get relief approvals in writing. Verbal assurances do not prevent future disputes.

Common mistakes to avoid

  • Assuming all deferments stop interest for every loan type. Only certain federal loans are subsidized.
  • Using repeated forbearances as a long-term solution; the debt can grow faster than expected.
  • Forgetting to check whether the relief counts toward loan forgiveness programs or income-driven repayment credits.

Frequently asked questions

Q: Can deferment or forbearance affect my credit score?
A: While approved deferment/forbearance generally prevents delinquency reporting during the authorized period, failing to secure approved relief or missing payments before approval can lead to delinquency and negative credit reporting.

Q: Can I switch from forbearance to a more favorable option?
A: Yes—contact your servicer. You may be able to switch to an income-driven repayment plan or apply for deferment if you meet eligibility requirements. Don’t assume one-time approvals are permanent.

Q: Will a private lender grant the same protections as federal student loans?
A: Not necessarily. Private lenders set their own policies. Some offer hardship forbearance but will not provide federally defined deferments or government interest subsidies.

Where to get authoritative help

Internal resources

Professional disclaimer: This article is educational and not individualized financial advice. Rules and program details can change; confirm specifics with your loan servicer or a qualified advisor before acting.