Student Loan Deferment and Forbearance

Deferment: A hold applied to student loans while the student remains enrolled for at least half time credit. A deferment can be applied each time the student re-enrolls and will also stop any interest from compounding because the Federal Government pays the interest during this time. Loans that the government will pay interest on during forbearance are Direct Subsidized Loans, Subsidized Federal Stafford Loans, and Federal Perkins Loans.

Forbearance: A temporary hold that a borrower request to pause monthly payments on their loans. This is usually due to temporary financial hardship (lost of employment, pay cut, unexpected expensive to secure household). There is no hold applied to interest, so interest will continue to accrue during forbearance time.

Be cautious of forbearance time. Although it can help avoid delinquency or default in a true time of need, extended forbearance time can result in rapid growth of your loan balance as the interest continues to compound. Many are shocked at the amount of growth the loans experience during forbearance.

These two options provide only momentary pending on repayment of the student loans and should not be considered a solution to repayment.

Another option is considering an Income Driven Repayment option. This will secure more of a long term solution to those in financial strain.

Income Driven Repayment Plans: Programs that use Direct Consolidation of Federal Student Loans to dramatically reduce monthly payments in most cases and and cap monthly payments a 15 of the household income. There are several plans recognized by DOE to income base your monthly payments.

            IBR: Income Based Repayment

            PAYe: Pay as You Earn

            REPAYe: Revised Pay as You Earn

            ICR: Income Contingent Repayment

Deferment and Forbearance for Private Student Loans

Having a deferment or forbearance granted for a private student loan may not be quite as simple as that of a Federal Student Loan. The approval will depend on several factors from your loan agreement and the leniency of your servicer.