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  • Writer's pictureSarah Camp

Deferment vs Forbearance for Student Loans: Key Differences Explained

What's the difference between deferment and forbearance for student loans?

Deferment and forbearance are both options that allow borrowers to temporarily postpone or reduce their student loan payments, but they have distinct differences in terms of eligibility, interest accrual, and the types of loans they apply to.

  1. Deferment: Deferment is a period during which borrowers can temporarily halt their loan payments. Many times, during deferment, interest doesn't accrue on subsidized federal loans and certain other types of loans. This means that the borrower won't be responsible for paying the interest that accumulates during the deferment period. Deferment is often granted for specific reasons such as being enrolled in school at least half-time, being unemployed, experiencing economic hardship, or serving in the military.

  2. Forbearance: Forbearance is another temporary relief option where borrowers can either pause or reduce their loan payments for a specified period. Unlike deferment, interest continues to accrue on all types of loans during forbearance. If the borrower doesn't pay the accruing interest during the forbearance period, it will be added to the principal balance of the loan, leading to higher overall debt. Forbearance is usually granted for reasons such as financial difficulties, medical expenses, or other personal hardships.

In summary, the key differences between deferment and forbearance are:

  • Interest Accrual: Deferment typically does not accrue interest on subsidized federal loans and certain other loans, while forbearance accrues interest on all loan types.

  • Eligibility: Both deferment and forbearance have specific eligibility criteria, often related t to circumstances like enrollment status, economic hardship, or health issues.

  • Interest Handling: During deferment, the government may cover the interest on subsidized federal loans vs. unsubsidized, but during forbearance, the borrower is generally responsible for all accruing interest.

It's important for borrowers to understand these distinctions and choose the option that best suits their individual financial situation and needs. Additionally, both deferment and forbearance are temporary solutions, and borrowers should resume regular payments as soon as they can to avoid increased debt over time.

Navigating private student loans requires thorough research and careful consideration. Consult with your college's financial aid office and explore sites like ELMSelect to view various lenders and find the loan that aligns with your financial goals. This will ensure a successful educational journey.

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