Student loan deferment and forbearance are both options that allow borrowers to temporarily postpone or reduce their federal student loan payments under specific circumstances. It’s important to note that these options are typically available for federal student loans, and private lenders may have different policies.
Student Loan Deferment:
- Definition:
- Deferment is a period during which repayment of the principal and interest of a loan is temporarily delayed. Interest does not accrue on subsidized federal loans during deferment.
- Eligibility:
- Borrowers may be eligible for deferment if they are enrolled in school at least half-time, experiencing economic hardship, unemployed, or meet other qualifying criteria.
- Application Process:
- To request deferment, borrowers usually need to submit a deferment request form to their loan servicer, along with supporting documentation.
- Duration:
- Deferment periods are generally granted for specific durations and are subject to approval based on the borrower’s circumstances.
Forbearance:
- Definition:
- Forbearance is another option for temporarily reducing or postponing federal student loan payments. During forbearance, interest continues to accrue on all types of federal student loans, including subsidized loans.
- Eligibility:
- Borrowers may be eligible for forbearance if they are facing financial hardship, experiencing medical expenses, or other qualifying circumstances. Forbearance is usually granted at the discretion of the loan servicer.
- Application Process:
- Borrowers typically need to apply for forbearance through their loan servicer. Some forbearances may be granted administratively, while others require a formal application.
- Duration:
- Forbearance periods can vary, and there may be both mandatory and discretionary forbearance options. Mandatory forbearance may be granted for specific circumstances outlined in federal regulations.
Important Considerations:
- Accrued Interest:
- In both deferment and forbearance, it’s important to be aware that interest may continue to accrue on the loan. For subsidized loans in deferment, the government may cover the interest during the deferment period.
- Impact on Repayment:
- While deferment and forbearance provide temporary relief, they extend the overall time it takes to repay the loan, and borrowers may end up paying more in interest over the life of the loan.
- Federal vs. Private Loans:
- These options primarily apply to federal student loans. Private lenders may offer their own forms of forbearance or deferment, but the terms can vary.
Borrowers should contact their loan servicer to discuss their specific circumstances, understand the available options, and determine the best course of action based on their financial situation.