Deferment and Forbearance: How They Differ and What Each Costs You

The core difference: who pays the interest

Deferment and forbearance both pause your monthly loan payments, but they treat interest differently. With deferment, the federal government pays the interest on subsidized loans while you're in deferment — your balance doesn't grow. With forbearance, interest keeps accruing and gets added to what you owe, so your balance grows even though you're not making payments.

Forbearance is easier to get into. Deferment requires you to meet specific conditions — being in school, serving in the military, or experiencing economic hardship. Forbearance is available to almost anyone with a federal loan who asks, as long as you're having trouble making payments.

The trade-off is simple: deferment protects you from interest growth but is harder to enter; forbearance is accessible but costs you more in the long run because interest compounds on top of what you already owe.

Key Takeaways

• Deferment stops interest from accruing on subsidized federal loans, but you must meet specific conditions like being enrolled in school or experiencing economic hardship.
• Forbearance pauses payments for almost anyone but interest keeps growing, and that unpaid interest gets added to your loan balance.
• Unsubsidized loans accrue interest during deferment just as they do during forbearance, so deferment offers no advantage for those loans.
• You can stay in forbearance for up to three years total, while deferment limits depend on your reason for deferring.
• Income-driven repayment plans may cost you less over time than either option if you have federal loans and lower income.

When you can use deferment

Deferment is available only if you fall into one of these categories. You must be enrolled at least half-time in an may be able to access school. You must be in a graduate fellowship program or rehabilitation training for people with disabilities. You must be serving on active duty in the military or be a member of the National Guard on active duty. You must be unemployed or underemployed and registered with your state's unemployment office. You must be experiencing economic hardship — this is the broadest category, but your loan servicer defines what counts.

Each category has its own time limit. School deferment lasts as long as you're enrolled plus six months after you graduate or drop below half-time status. Military deferment covers your active duty plus 13 months after you leave. Economic hardship deferment is typically three years, though you can request it again if your hardship continues.

To enter deferment, you contact your loan servicer directly. They'll ask you to document your reason — a school enrollment letter, a military discharge document, or proof of unemployment. The process usually takes two to four weeks.

When you can use forbearance

Forbearance is the fallback option. If you don't meet deferment criteria but you're struggling to pay, your servicer can put you in forbearance. You don't have to prove you're in school or unemployed. You just have to show that paying would be a hardship — and servicers interpret that broadly.

There are two types of forbearance: general forbearance and mandatory forbearance. General forbearance is what your servicer grants when you ask and explain your situation. Mandatory forbearance is what they must grant if you meet certain conditions — if you're a medical or dental resident, if you're serving in the Peace Corps, if your federal student loan debt is high relative to your income, or if you're on a military-related payment plan.

You can stay in general forbearance for up to three years total, though your servicer may grant it in shorter periods and ask you to reapply. Mandatory forbearance has its own time limits depending on your situation.

How interest works in each option

On subsidized federal loans, deferment stops interest from accruing. The government covers it. Forbearance does not — interest keeps growing and gets capitalized, meaning it's added to your principal balance. This is the biggest financial difference between the two.

On unsubsidized federal loans, interest accrues in both deferment and forbearance. The only difference is that in forbearance, you can choose to pay the interest as it accrues, or let it capitalize. In deferment, you have no choice — it capitalizes automatically.

On private loans, deferment and forbearance work differently depending on your lender's terms. Some private lenders don't offer either option. Others offer forbearance but not deferment. Read your loan documents or call your servicer to find out what's available to you.

What happens when deferment or forbearance ends

When your deferment period ends, your loans go back into repayment. If you were in school deferment, you enter the grace period (usually six months) before payments start. If you were in economic hardship deferment, payments resume immediately unless you request another deferment or enter forbearance.

When forbearance ends, payments resume at their original amount. If you let interest capitalize during forbearance, your new payment may be higher because you're now paying interest on a larger balance. If you paid interest as it accrued, your balance didn't grow and your payment stays the same.

If you can't afford payments when either period ends, you can request forbearance again, or you can explore income-driven repayment plans. Income-driven plans cap your payment at a percentage of your discretionary income — sometimes as low as $0 per month — and forgive remaining balance after 20 to 25 years of payments.

Comparing the long-term cost

Deferment costs you nothing in interest if you have subsidized loans. Forbearance costs you the interest that accrues, compounded over time. On a $30,000 subsidized loan at 5% interest, one year of forbearance adds roughly $1,500 to your balance. That $1,500 then accrues its own interest for the rest of your repayment period.

However, deferment is only an option if you meet the criteria. If you don't — if you're working full-time and not in school, not in the military, and not officially unemployed — forbearance is your only pause option. In that case, the question isn't deferment versus forbearance; it's forbearance versus continuing to pay.

If you have unsubsidized loans or private loans, deferment offers no interest advantage, so the choice comes down to which you can enter and how long you need the pause. If you have federal loans and lower income, income-driven repayment may be cheaper over time than either deferment or forbearance, because payments are based on what you earn rather than what you owe.

How to request deferment or forbearance

Contact your loan servicer — the company that sends your bill. You can find them by logging into studentaid.gov and checking your loan details, or by calling the Federal Student Aid Information Center at 1-800-4-FED-AID (1-800-433-3243). Have your Social Security number and date of birth ready.

Tell your servicer which option you're requesting and why. If you're requesting deferment, be specific about your reason — you're enrolled in school, you're unemployed, you're in the military, or you're experiencing economic hardship. If you're requesting forbearance, explain what's making it hard to pay right now.

Your servicer will send you a form to sign. Return it within the timeframe they give you — usually 10 to 14 days. Processing takes two to four weeks. During that time, keep making your regular payments if you can, because you're still responsible for them until deferment or forbearance officially starts.

Frequently Asked Questions

Can I switch from forbearance to deferment if I become unemployed?

Yes. If you enter forbearance and then lose your job or meet another deferment criterion, contact your servicer and request a switch. They'll end the forbearance and start deferment, which stops interest from accruing on subsidized loans. This can save you money if you're in forbearance and your circumstances change.

Does deferment or forbearance hurt my credit score?

Deferment and forbearance themselves don't damage your credit. However, if you miss payments before entering either one, those missed payments stay on your credit report. Once you're in deferment or forbearance, you're current on your loans and no new damage occurs.

What if I can't afford payments when forbearance ends?

You can request forbearance again, or you can explore income-driven repayment plans. Income-driven plans recalculate your payment based on your current income and family size, and may lower your payment significantly. You can also look into Public Service Loan Forgiveness if you work for a government agency or nonprofit.

Do Parent PLUS loans may have access to for deferment or forbearance?

Parent PLUS loans have limited deferment options — only if you're in school, in a graduate fellowship, or in rehabilitation training. Forbearance is available. Contact your servicer to discuss which option works for your situation, since Parent PLUS rules differ from standard federal loans.

If I'm in deferment on a subsidized loan, does the interest really not accrue at all?

Correct — on subsidized loans, the government pays the interest during deferment, so your balance doesn't grow. This is the main advantage of deferment over forbearance. On unsubsidized loans, interest accrues in deferment just as it does in forbearance.