What's the Difference Between Student Loan Forbearance and Deferment?

Legal Update: After the U.S. Supreme Court struck down President Biden's debt cancellation plan, the administration introduced a 12-month "on-ramp" repayment program. Beginning October 1, 2023, and for a year after that, the Education Department won't report borrowers who miss payments to the credit bureaus, consider them delinquent, place them in default, or refer them to debt collection agencies. But interest will accrue.

In addition, the Biden Administration announced that, in February 2024, it would start canceling federal student loan debts for anyone who initially borrowed $12,000 or less and has been in repayment for at least 10 years if they first enroll in the SAVE income-based repayment plan. The timeframe for loan forgiveness increases by one year with each additional $1,000 of debt. So, for example, a student who took out $14,000 in loans would have their debts canceled if they've been making payments for 12 years. It doesn't matter what repayment plan or plans you previously had, so long as you were actively repaying your loans and are enrolled in the SAVE plan. In the future, the Department of Education will continue to identify and forgive the loans of eligible borrowers on an ongoing basis.

However, on March 28, 2024, eleven states filed a federal lawsuit arguing that President Biden overstepped his authority in creating the SAVE Plan.

If money is tight and your federal student loan payments are higher than you can afford, you might be able to get assistance through a federal program called "deferment" or "forbearance."

• With a deferment, your loan payments are postponed, and interest doesn't accrue on subsidized loans.
• With a forbearance, your loan payments are postponed or reduced, but interest continues to accrue during the forbearance period.

What Kind of Student Loans Are Eligible for Deferment? And Forbearance?

Deferment and forbearance are available for federal student loans but are usually unavailable for private student loans. If you're unsure what kind of loans you have, go to the National Student Loan Data System to track down your loan type.

But deferment and forbearance aren't available if you're in default on your federal student loans.

What Is a Deferment of Federal Student Loans?

Again, in a deferment, loan payments are halted, and interest doesn't accrue on subsidized loans. Subsidized loans include Federal Perkins Loans, Direct Subsidized Loans, Subsidized Federal Stafford Loans, the subsidized portion of Direct Consolidation Loans, and the subsidized portion of FFEL Consolidation Loans.

How Can I Qualify for a Deferment?

Deferment is available under several different circumstances, including when:

• you're enrolled at least half-time in a post-secondary school (if you received a Direct PLUS Loan or an FFEL PLUS Loan as a graduate or professional student, you may get a deferment for an additional six months after you stop being enrolled at least half-time)
• you're a parent who received a Direct PLUS Loan or an FFEL PLUS Loan (you may get a deferment while the student for whom you obtained the loan is enrolled at least half-time at an eligible college or career school, and for an additional six months after the student stops being enrolled at least half-time)
• you're enrolled in an approved graduate fellowship program (your school can tell you if it is an approved program for deferment)
• you're disabled and enrolled in an approved rehabilitation training program
• you're unemployed or unable to find full-time employment (this deferment is limited to three years)
• you're experiencing economic hardship or serving in the Peace Corps (this deferment is limited to three years)
• you're on active duty with the military, or have been on active duty within the past 13 months, in connection with a war, military operation, or national emergency, or
• you're receiving treatment for cancer. You may also receive a deferment for six months after treatment ends.

How Do I Get a Deferment of My Federal Student Loans?

You must apply to your loan servicer to receive a deferment. Your servicer is the company that communicates with you about loan payments.

What Is a Forbearance of Federal Student Loans?

A forbearance suspends or reduces your loan payments, but interest continues to accrue during the forbearance period. If you don't pay the interest during that time, it may be "capitalized," which means the interest is added to your principal balance.

Even though the terms for forbearance aren't as favorable as deferment, forbearance is definitely a better option than default if you're in financial distress.

How Can I Qualify for Forbearance?

Your loan servicer determines if you're eligible for forbearance.

When the servicer may grant forbearance. In some cases, the loan servicer has the discretion to grant forbearance. A servicer may grant what's called a "general forbearance" if you're experiencing:

• financial problems
• medical expenses
• a change in your employment, or
• some other reason your servicer finds acceptable.

General forbearances are available for Direct Loans, FFEL Program loans, and Perkins Loans, but for no more than 12 months at a time. While the program doesn't set a cumulative limit on general forbearance for Direct Loans and FFEL Program loans, your loan servicer might limit the maximum amount of time you can get a general forbearance.

When the servicer must grant forbearance. In other cases, a servicer must offer a "mandatory forbearance." Forbearance is mandatory if:

• you're enrolled in a medical or dental internship or residency, and you meet specific requirements
• your monthly student loan payment is 20% or more of your monthly gross income (and you meet other conditions)
• you're serving in a national service position, such as Americorps, or
• you're eligible for teacher loan forgiveness, the Department of Defense's loan repayment program, or in the National Guard.

Ask your loan servicer for specific details on qualifying for mandatory forbearance.

Other Options for Dealing With Student Loan Debt

If you're experiencing financial hardship, you should also consider the different repayment plans and forgiveness options that the Department of Education offers for federal student loans.