For the past seven years, Kat has been helping people make the best financial decisions for their unique situations, whether they're looking for the right insurance policies or trying to pay down debt. Kat has expertise in insurance and student loans.
Kat Tretina Personal Finance WriterFor the past seven years, Kat has been helping people make the best financial decisions for their unique situations, whether they're looking for the right insurance policies or trying to pay down debt. Kat has expertise in insurance and student loans.
Written By Kat Tretina Personal Finance WriterFor the past seven years, Kat has been helping people make the best financial decisions for their unique situations, whether they're looking for the right insurance policies or trying to pay down debt. Kat has expertise in insurance and student loans.
Kat Tretina Personal Finance WriterFor the past seven years, Kat has been helping people make the best financial decisions for their unique situations, whether they're looking for the right insurance policies or trying to pay down debt. Kat has expertise in insurance and student loans.
Personal Finance Writer Mike Cetera Editor in Chief, Forbes Marketplace U.S.Mike Cetera is the editor in chief for Forbes Marketplace U.S. Mike has written and edited articles about mortgages, savings accounts, CD rates and credit cards for more than a decade. Prior to joining Marketplace, his work appeared on Bankrate, The.
Mike Cetera Editor in Chief, Forbes Marketplace U.S.Mike Cetera is the editor in chief for Forbes Marketplace U.S. Mike has written and edited articles about mortgages, savings accounts, CD rates and credit cards for more than a decade. Prior to joining Marketplace, his work appeared on Bankrate, The.
Written By Mike Cetera Editor in Chief, Forbes Marketplace U.S.Mike Cetera is the editor in chief for Forbes Marketplace U.S. Mike has written and edited articles about mortgages, savings accounts, CD rates and credit cards for more than a decade. Prior to joining Marketplace, his work appeared on Bankrate, The.
Mike Cetera Editor in Chief, Forbes Marketplace U.S.Mike Cetera is the editor in chief for Forbes Marketplace U.S. Mike has written and edited articles about mortgages, savings accounts, CD rates and credit cards for more than a decade. Prior to joining Marketplace, his work appeared on Bankrate, The.
Editor in Chief, Forbes Marketplace U.S.Updated: Nov 12, 2020, 7:45am
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If you’ve lost your job or had a medical emergency and are struggling with your student loans, you’re not alone. According to the Federal Reserve, about 20% of student loan borrowers were behind on their payments in recent years. If you can’t afford your minimum student loan payments, entering into deferment or forbearance can give you some relief since your loan servicer will temporarily postpone your payments, although you may continue to accumulate interest.
As of early 2020—before the CARES Act suspended federal student loan payments—7.4 million borrowers had over $290.9 billion in outstanding student loans in deferment or forbearance. But that suspension is scheduled to end at the start of 2021.
When thinking about entering into forbearance vs. deferment, here’s what you should know.
Depending on your situation, you may qualify for a federal deferment or forbearance and pause your student loan payments. If eligible, you won’t become delinquent or enter into student loan default. However, the length of time your loan payments are postponed and how interest accrues depends on whether you qualify for a deferment or forbearance.
With federal loan forbearance, you can stop making payments or make reduced payments for a fixed period. However, interest will continue to accrue on your loans. If you have direct loans, interest is capitalized, or added to your loan principal.
There are two types of federal loan forbearance:
With mandatory forbearance, your student loan servicer is required to accept your forbearance request if your situation meets one of the following requirements:
If you qualify for a mandatory forbearance, your loan servicer will allow you to postpone your payments for up to 12 months at a time. If you continue to meet the eligibility requirements for a mandatory forbearance, you can receive additional forbearance periods. Mandatory forbearances only apply to direct and Family Federal Education Loans (FFEL).
A general forbearance is up to your loan servicer’s discretion and is available for direct, FFEL and Perkins loans. You can get a general forbearance in some circumstances, including:
If the loan servicer grants your request for forbearance, you can postpone your payments for up to 12 months. While a general forbearance can be renewed, there is a cumulative limit of three years.
Like forbearance, student loan deferments allow you to postpone your payments temporarily. Deferments are not automatic, and your request must be agreed to by your loan servicer.
You can qualify for student loan deferments based on:
Federal loan deferment is available for direct, FFEL or Perkins loan borrowers.
Federal forbearance and deferment are very similar, but the biggest difference between them is how interest accrues.
With forbearance, interest accrues on all student loans, and you’re responsible for paying interest charges. You can decide to pay interest as it accrues during your payment postponement period, or you can allow it to accrue and be capitalized to your principal balance.
If you’re eligible for a federal deferment, you may not have to pay interest. If you have one of the following types of loans, the U.S. Department of Education will cover your interest payments while in deferment:
When deciding which is better for you—deferment or forbearance—keep the following questions in mind:
With federal loan deferment and forbearance, you have to contact your loan servicer to submit a request. In most cases, you’ll also be asked to complete specific forms and submit documentation supporting your application. For example, if you’re requesting forbearance due to a medical emergency, you’ll need to submit copies of your medical bills.
If you’re not sure who your loan servicer is, call the Federal Student Aid Information Center at 800-433-3243.
Private student loans work quite differently than federal loans. While some private lenders offer forbearance programs for those experiencing financial hardship, not all of them do.
With private loan forbearance, interest always accrues on your loan and is capitalized to your principal balance. Private student loan forbearance typically is much shorter in duration than federal forbearance or deferment. You can usually postpone your payments for one to three months at a time, and most lenders cap the amount of time you can suspend payments over the life of your loan.
For example, private lender ELFI allows you to halt your payments for up to 12 months during your loan term. However, forbearance is up to the discretion of the lender.
If you have private loans and can’t afford your payments, contact your lender to learn about your repayment options.
Forbearance and deferment aren’t for everyone, especially since interest can continue to accrue on your loans. If you need help with your payments, consider these options instead:
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Personal Finance WriterFor the past seven years, Kat has been helping people make the best financial decisions for their unique situations, whether they're looking for the right insurance policies or trying to pay down debt. Kat has expertise in insurance and student loans, and she holds certifications in student loan and financial education counseling.
Editor in Chief, Forbes Marketplace U.S.Mike Cetera is the editor in chief for Forbes Marketplace U.S. Mike has written and edited articles about mortgages, savings accounts, CD rates and credit cards for more than a decade. Prior to joining Marketplace, his work appeared on Bankrate, The Points Guy and Fit Small Business. Mike earned a master’s degree in public affairs reporting from the University of Illinois and has been a journalist for more than two decades. He also has offered his expertise in numerous TV, radio and print interviews.
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