Quick comparison

How the difference matters in practice

  1. Interest and cost
  • Forbearance: Interest accrues on subsidized and unsubsidized loans. If you don’t pay the interest while in forbearance, it capitalizes (is added to principal) when the forbearance ends, increasing future interest charges.
  • Deferment: Subsidized federal loans have interest paid by the government for certain deferments; unsubsidized loans typically accrue interest. See details at the U.S. Department of Education (https://studentaid.gov).
  1. Eligibility and approval
  • Deferment: You must meet specific criteria (e.g., enrolled at least half‑time, unemployment, economic hardship). Approval follows documentation rules and statutory guidelines.
  • Forbearance: Often easier to get because servicers can grant it for general financial hardship, medical issues, or federal emergency relief. Types include discretionary and mandatory forbearance.
  1. Effects on repayment progress and forgiveness
  • Neither standard deferment nor forbearance counts as qualifying payments for Public Service Loan Forgiveness (PSLF) or some income-driven repayment (IDR) forgiveness programs, unless a specific program rule says otherwise. Confirm with your servicer and the loan servicer’s records (https://studentaid.gov).
  1. Private loans vs federal loans
  • Private lenders set their own policies. Some private loans offer hardship forbearance; few offer subsidized deferments. Ask your lender for terms and get agreements in writing.

Practical steps to choose the right relief

  1. Verify loan type and servicer details (federal vs private).
  2. Check deferment eligibility before requesting forbearance—deferment can be cheaper if you qualify.
  3. If you must use forbearance, pay accrued interest if you can to avoid capitalization.
  4. Explore alternatives: income-driven repayment (IDR) plans, temporary reduced payments, or deferment tied to enrollment. In my practice I’ve found borrowers often lower long-term cost by switching to an IDR plan instead of repeated forbearances.

Examples (real-world context)

  • Example A: A borrower in graduate school qualifies for an in-school deferment; their Direct Subsidized Loans don’t accrue interest while enrolled half‑time.
  • Example B: A borrower laid off between jobs requests a 6‑month discretionary forbearance; interest accrues and capitalizes, adding several hundred dollars to the balance after reentry to repayment.

What to ask your servicer (checklist)

  • Will interest continue to accrue during the relief period?
  • Will interest capitalize when the relief ends?
  • Does time in relief count toward loan forgiveness programs?
  • How will this choice affect my monthly payment and total interest paid?

Common mistakes to avoid

  • Assuming all deferments stop interest—only subsidized federal loans have interest paid by the government for qualifying deferments.
  • Taking multiple forbearances without checking capitalization and long‑term cost.

Related FinHelp articles

Sources and further reading

Professional disclaimer: This content is educational and reflects general guidance as of 2025. It is not individualized legal, tax, or financial advice. Contact your loan servicer or a qualified financial professional for personalized recommendations.