Overview

When a borrower can’t make full loan payments, lenders may offer forbearance or deferment as temporary relief. These tools exist across loan types—federal student loans, private student loans, mortgages, and personal loans—but the rules differ by lender and loan program. Understanding the mechanics and consequences of each option helps you protect your credit, limit added costs, and preserve any loan-forgiveness progress.

In my 15+ years helping clients navigate repayment options, I’ve seen how a timely, informed choice can prevent long-term harm. Below I summarize the differences, real-world impacts, and step-by-step actions you should take if you’re offered relief.

How forbearance and deferment differ (quick comparison)

  • Forbearance: Lender or servicer agrees to temporarily reduce or suspend payments. Interest generally continues to accrue on most loans during forbearance and may be capitalized (added to principal) when payments resume. This applies to federal student loans and most private loans. (U.S. Dept. of Education, Federal Student Aid)
  • Deferment: A pause in payments that is usually tied to a qualifying status—school enrollment, military service, economic hardship, or unemployment. For federal student loans, subsidized loans do not accrue interest during many deferments; unsubsidized loans generally do. Deferment availability for private loans varies. (Federal Student Aid)

What actually happens to interest and balances

  • Federal student loans: Interest accrues during forbearance on all loan types. During deferment, the government may pay interest on subsidized loans for certain deferments; otherwise interest accrues. See studentaid.gov for current details. (U.S. Dept. of Education – Federal Student Aid)
  • Private student loans and personal loans: Interest commonly accrues during either option; the lender’s forbearance terms determine whether interest capitalizes. Read written terms before agreeing.
  • Mortgages: Mortgage forbearance suspends or reduces mortgage payments temporarily. Interest continues to accrue unless a special plan applies; servicers will explain options for repayment, including a repayment plan, loan modification, or lump-sum payment at the end of the forbearance period. The CARES Act created forbearance rules for federally backed mortgages during the COVID-19 period, but that temporary relief has ended—current servicer programs differ. (CFPB; HUD)

Credit reporting and your credit score

  • If a servicer agrees to a forbearance or deferment and documents the arrangement, the account should not be reported as delinquent for that agreed period. However, if payments are missed without an approved agreement, missed payments can be reported and harm credit. Always get written confirmation from your servicer. (Consumer Financial Protection Bureau)

Impact on loan forgiveness and repayment count

  • For federal student loans, months in forbearance typically do NOT count toward Public Service Loan Forgiveness (PSLF) or toward the required number of qualifying payments for many income-driven plans. Some limited administrative forbearances or special circumstances may count; verify with your loan servicer and the official Federal Student Aid guidance. (Federal Student Aid)

When each option is commonly used

  • Forbearance: Short-term crises like job loss, medical emergencies, temporary income loss. Lenders often grant discretionary forbearance for private loans and many federal situations that don’t fit deferment rules.
  • Deferment: Enrollment in school, approved military service, economic hardship programs, or unemployment that meets lender or federal eligibility rules.

Real-world examples (anonymized)

  • Client A (mortgage): After sudden job loss, the client secured a three-month forbearance with their mortgage servicer and avoided foreclosure while searching for work. The servicer later offered a repayment plan to spread past-due amounts over 12 months rather than one lump sum.
  • Client B (student loans): A recent grad used a six-month deferment while searching for work. Their subsidized federal loan did not accrue interest during the deferment, reducing immediate cost and preserving their balance.

Practical checklist: Before you accept relief

  1. Get the offer in writing. Never rely on a phone promise alone. Ask for an agreement that states start/end dates, whether interest accrues, whether interest will capitalize, repayment options after relief, and how the servicer will report the account to credit bureaus. (CFPB recommends getting details in writing.)
  2. Ask whether the relief counts toward any forgiveness or repayment programs you’re pursuing (PSLF, Income-Driven Repayment forgiveness). If you’re pursuing PSLF, confirm with FedLoan or your current servicer whether the period will count. (Federal Student Aid)
  3. Understand interest capitalization. If interest capitalizes, your principal balance increases and future monthly payments can be higher.
  4. Check for alternative relief. Ask about income-driven repayment plans (for federal loans), temporary repayment plans, or loan modification before choosing forbearance if you want to preserve forgiveness progress. See our guide on Options for Student Loan Deferment vs Forbearance: Pros, Cons, and Consequences.
  5. Keep records. Save emails, letters, and the written agreement. If you spoke by phone, note the date, time, name of the representative, and summary of what was said.

How to apply — step-by-step

  1. Contact your servicer early (before missing payments when possible). Explain the hardship succinctly and request specific relief—deferment (if eligible) or forbearance.
  2. Document what you provide. Common documents: pay stubs, termination notices, medical bills, school enrollment verification, military orders, or proof of unemployment benefits.
  3. Request written confirmation with explicit terms: start/end dates, interest treatment, and the post-relief repayment plan.
  4. If denied, ask for the reason in writing and whether you can appeal. You may also qualify for alternative options like income-driven repayment (federal) or hardship modification (private). See our article on Negotiating Forbearance: Documentation, Steps, and Long-Term Impacts for negotiation tactics.

Common mistakes to avoid

  • Accepting a verbal agreement. Without writing, you risk being charged late or reported incorrectly.
  • Ignoring interest costs. Many borrowers focus on short-term relief without calculating long-term cost from interest capitalization.
  • Assuming relief won’t affect forgiveness. Forbearance months rarely count toward PSLF or forgiveness under most income-driven plans.

Example scripts (short) you can adapt

  • To request forbearance: “Hello, I’m [Name]. I am experiencing [job loss/medical issue] and need temporary relief. I’d like to request a forbearance starting [date] for [length]. Please tell me what documentation you need and send the agreement in writing.”
  • To request deferment (student loan): “Hello, I’m enrolled at [school name]/I’m unemployed. I believe I qualify for a deferment. What documentation do you require, and will interest accrue during the deferment?”

When to seek professional help

If a servicer denies relief, if you’re near default, or if you need tailored help protecting forgiveness eligibility, consult a qualified student loan counselor or an experienced housing counselor (for mortgages). The CFPB and the U.S. Dept. of Education list approved counseling resources. Also consider legal advice if collection threats begin.

Key takeaways

  • Forbearance and deferment both pause or reduce payments, but the financial consequences differ—especially in how interest accrues and whether the relief counts toward forgiveness.
  • Always get a written agreement, understand interest capitalization, and verify impacts on credit reporting and forgiveness programs before agreeing.
  • Explore alternatives (income-driven plans, modifications, temporary relief programs) as these may cost less in the long run.

Professional disclaimer

This article is educational and not legal, tax, or financial advice. Rules change; verify your options with your loan servicer and consult a qualified professional for advice tailored to your situation. I draw on over 15 years of client work to highlight practical steps and common pitfalls.

Authoritative sources and further reading

  • U.S. Department of Education, Federal Student Aid — studentaid.gov (current guidance on deferment, forbearance, and forgiveness)
  • Consumer Financial Protection Bureau (CFPB) — guidance on forbearance, credit reporting, and mortgage servicing
  • U.S. Department of Housing and Urban Development (HUD) — guidance for homeowners and mortgage servicers

Internal resources