What is the difference between a deferment vs forbearance

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During the coronavirus pandemic, many lenders are offering either mortgage forbearance or deferment, which are both types of relief that allow you to pause or reduce monthly payments. Interest always accrues while payments are in forbearance, and interest sometimes keeps building with deferment. Forbearance typically requires you to repay the paused amount in a lump sum at the end of the forbearance period; deferment lets you make repayments over time.

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Generally, the question of whether to request forbearance versus deferment comes down to which you qualify for. Both deferment and forbearance allow you to postpone student loan payments, but they differ in a few key ways. For one, deferment on federal student loans must be tied to a qualifying event. The qualifying events differ for forbearance, and eligibility is determined by your loan servicer. Additionally, interest accrues on all federal student loans during forbearance and will be added to the loan balance later, a process known as capitalization.

While all federal student loans follow the same guidelines for forbearance and deferment, the rules are different for private student loans. If you have private student loans and you are looking for forbearance and deferment options, you should contact your loan servicer and find out what options it may have for you. Not every private student loan servicer will offer forbearance options, but many offer options for loan forbearance if you meet certain requirements. If you are looking for forbearance or deferment options on your private student loans, get all of the details upfront.

Just like forbearance or deferment on federal loans, these options will be temporary. Understand the timeline your servicer offers for forbearance, as well as whether interest accrues during that time. Federal student loan forbearance allows you to pause student loan payments for up to 12 months at a time, with a three-year cap.

The only type of loan not subject to capitalization is Perkins Loans. The Department of Education may also implement periods of administrative forbearance, which applies to all federal student loan borrowers. This is the case with the coronavirus relief measures established in early , which halts student loan payments and interest accrual on all federal student loans through Sept. If you have private student loans, forbearance options may be available to you, but forbearance options and eligibility differ for each private loan servicer.

Talk to your loan servicer to find out what option may be available to you. To apply for federal student loan forbearance, you should use the applicable student loan forbearance form. Length varies by deferment type; some last three years, while others are available as long as you qualify.

No more than 12 months at a time, with no set maximum for most federal loans. Tied to a qualifying event like being unemployed or enrolled in school at least half time. A specific qualifying event is usually not necessary. Different deferments have different forms. Send the correct one and any necessary documentation to your student loan servicer. Interest does not accrue on subsidized federal student loans and Perkins loans.

Your servicer must grant you a deferment if you meet its eligibility criteria and have deferment time available. Student loan deferment has no impact on your credit. Student loan forbearance has no impact on your credit. If you've missed payments but your loans haven't defaulted yet, both deferment and forbearance can be applied retroactively to let you catch up.

If you need to take a break from payments, student loan deferment is a better option than forbearance. You may do so based on the following:. Attending school at least half time. Being unemployed. Being on active military duty or in the Peace Corps. Student loan deferment also makes sense if you have subsidized federal student loans or Perkins loans.

Consider this example: You were in an accident and have to pay a large medical bill. Placing your loans in forbearance would allow you to put the money from your student loan payment toward your other bills and then resume repayment.