What Is Deferment vs. Forbearance (Student Loans)?
Deferment and forbearance are two ways to temporarily pause or reduce federal student loan payments, but they differ in a critical way: during deferment, the government pays the interest on subsidized loans (it does not accrue), while during forbearance, interest usually accrues on all loan types — increasing the total amount owed. For Direct Loans, that interest is no longer added to principal automatically when an ordinary forbearance ends, but it still has to be paid. Choosing forbearance when deferment is available can cost borrowers thousands in additional interest.
Key Facts
- During deferment on subsidized loans, the federal government pays accruing interest — the borrower's balance stays the same, making deferment significantly cheaper than forbearance for subsidized loan holders
- During forbearance, interest accrues on ALL loan types (subsidized and unsubsidized) — a borrower with $40,000 at 6% accumulates $2,400 in interest during one year of forbearance. Since July 1, 2023, Direct Loans no longer add that interest to principal when an ordinary forbearance ends; older FFEL loans may
- The Navient $1.85 billion settlement (2022) centered on the servicer steering 2+ million borrowers into forbearance when they qualified for deferment or income-driven repayment — a practice that cost borrowers thousands each in unnecessary interest
- Economic hardship deferment is available for up to 3 years in total, through several routes (public assistance, low full-time earnings or Peace Corps service), for loans disbursed before July 1, 2027 — the same borrowers who would likely qualify for $0 payments under income-driven repayment
- The COVID-era payment pause (March 2020 – August 2023) was technically an administrative forbearance, but with a special provision: interest did not accrue, making it the most borrower-friendly forbearance in federal student loan history
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Key Differences: Deferment vs. Forbearance
Both pause payments, but the financial impact differs substantially:
- Interest on subsidized loans: Deferment — government pays. Forbearance — accrues (on Direct Loans, it is no longer added to principal at the end of an ordinary forbearance).
- Interest on unsubsidized loans: Both — accrues and may capitalize. No difference for unsubsidized.
- Eligibility: Deferment has specific qualifying criteria (enrollment, unemployment, economic hardship, military). Forbearance is more broadly available (general forbearance up to 12 months at servicer discretion, mandatory forbearance for specific situations).
- Duration: Deferment varies by type (3 years for economic hardship, unlimited for in-school). General forbearance is discretionary: it is granted for up to one year at a time and can be renewed while the condition lasts. For loans disbursed on or after July 1, 2027, it is limited to nine months in any 24-month period.
- Application: Deferment requires documentation of qualifying status. General forbearance is easier to get than deferment, though the servicer can ask for documentation of your hardship — which is why servicers steered borrowers there.
Types of Deferment
- In-school deferment: While enrolled at least half-time. No time limit.
- Unemployment deferment: While receiving unemployment benefits or unable to find full-time work. Up to 3 years.
- Economic hardship deferment: While receiving public assistance such as SSI or SNAP, working full-time with a monthly income at or below the greater of the minimum-wage amount or 150% of the poverty guideline for your family size, or serving in the Peace Corps. Up to 3 years in total, for loans disbursed before July 1, 2027.
- Military service deferment: During qualifying active duty or National Guard service in a war, military operation or national emergency, plus 180 days after demobilization for service that includes or begins after October 1, 2007.
- Cancer treatment deferment: During cancer treatment and for six months afterward, with no interest accruing. Created by a 2018 law, for covered loans.
Types of Forbearance
- General forbearance (discretionary): Granted at the servicer's discretion for financial hardship, medical expenses, change in employment, or other reasons. Up to 12 months at a time, 3 years cumulative.
- Mandatory forbearance: Servicer must grant for specific situations: medical/dental residency, AmeriCorps/National Guard, teacher loan forgiveness, student loan payments exceeding 20% of gross income, or Department of Defense qualifying programs.
Why IDR Is Almost Always Better Than Either
For most struggling borrowers, income-driven repayment is superior to both deferment and forbearance:
- Payments can be $0/month if income is below the threshold — same practical effect as deferment or forbearance.
- Months of $0 IDR payments count toward PSLF and IDR forgiveness — deferment and forbearance generally do not.
- No time limit — IDR continues indefinitely, while deferment and forbearance have cumulative caps.
Student-loan delinquency, which rises when borrowers exhaust deferment and forbearance without transitioning to IDR — often because servicers failed to inform them of the option — is contextual evidence of the same household payment stress the American Distress Index's Delinquency domain captures through mortgage, credit-card, consumer-loan, and auto-loan delinquency.
Frequently Asked Questions
Should I choose deferment or forbearance?
If you have subsidized loans and qualify for deferment, always choose deferment — the government pays your interest. If you only have unsubsidized loans, there's no interest difference. But in most cases, income-driven repayment is better than either because $0 IDR payments count toward loan forgiveness.
Does interest grow during deferment?
For subsidized loans: no — the government pays accruing interest during deferment. For unsubsidized loans and PLUS loans: yes — interest accrues during deferment and may capitalize when deferment ends. This is why unsubsidized borrowers should consider IDR over deferment.
How much does forbearance cost in extra interest?
A borrower with $40,000 in loans at 6% interest accrues $2,400 per year in forbearance. Over 3 years of cumulative forbearance, that's $7,200 in additional interest you owe. On Direct Loans that interest is no longer added to principal when an ordinary forbearance ends; on other loans it can be, raising the balance to $47,200 and the payments recalculated on it.
Do deferment or forbearance months count toward loan forgiveness?
Usually not, but some do. Under permanent federal rules, certain deferments and forbearances — such as for cancer treatment, unemployment, or economic hardship — can count toward PSLF and IDR forgiveness; most others don't. The 2022 IDR Account Adjustment was a separate one-time credit. Check how your loan and program treat each period.
What was the Navient forbearance scandal?
Navient systematically steered struggling borrowers into forbearance instead of income-driven repayment, because forbearance required less processing time (90 seconds vs. 20+ minutes). This cost borrowers thousands in unnecessary interest and delayed forgiveness progress. Navient settled for $1.85 billion in 2022.