When you cannot afford your student loan payments, deferment and forbearance let you temporarily pause or reduce payments. But they are not the same: deferment on subsidized loans stops interest from accruing, while forbearance and deferment on unsubsidized loans let interest continue to accrue. The wrong choice, or misunderstanding your options, can add thousands to your total loan balance.
What is a Deferment and Forbearance?
Deferment is a period during which your loan payments are temporarily suspended. For subsidized Direct Loans, the federal government pays the interest during deferment — meaning your balance does not grow. For unsubsidized loans, interest accrues during deferment and is capitalized (added to principal) at the end of the deferment period. Forbearance is a similar pause but interest always accrues, regardless of loan type. Common deferment eligibility includes enrollment in school at least half-time, unemployment, economic hardship, military service, and cancer treatment.
Red flags to watch for
If you qualify for deferment on subsidized loans, forbearance costs you more because interest accrues during forbearance on all loan types. Always apply for deferment first if eligible.
Unpaid interest that capitalizes (is added to your principal) increases your total balance, meaning you pay interest on interest. This can significantly increase the total cost of your loan.
Unlike federal loans, private student loan deferment and forbearance are not guaranteed by statute — they are granted at the lender's discretion. Your private loan promissory note may offer limited or no hardship options.
Most forbearance periods do not count as qualifying payments toward income-driven repayment forgiveness or Public Service Loan Forgiveness. Extended forbearance can delay your forgiveness timeline significantly.
Servicers have historically enrolled struggling borrowers in forbearance instead of IDR plans — costing borrowers qualifying payment credit and increasing their balance. Proactively request IDR enrollment.
Your legal rights
Federal student loan borrowers have statutory rights to deferment in defined circumstances under the Higher Education Act. These rights cannot be waived by promissory note terms. Forbearance for federal loans is available at lender discretion in additional hardship circumstances. Private loan rights depend entirely on the promissory note terms. Servicers are required to inform you of all available repayment options.
Questions to ask before you sign
- 1Are your loans federal or private — federal loan deferment rights are statutory, private loan rights are contractual only?
- 2Do you qualify for a specific deferment category (school enrollment, unemployment, military service)?
- 3For subsidized loans, will interest be paid by the government during deferment?
- 4Will unpaid interest capitalize at the end of the deferment or forbearance period?
- 5Will the deferment or forbearance period count toward IDR forgiveness or PSLF qualifying payments?
Disclaimer: This guide is for educational purposes only and does not constitute legal advice. Contract law varies by jurisdiction and individual circumstances. Always consult a qualified legal professional before making decisions based on this information.