Student loan forbearance vs. deferment: understanding your payment pause options

Deferment and forbearance both allow you to temporarily stop making federal student loan payments, but the key difference lies in how interest is handled. During deferment, the government may pay the interest on subsidized loans, whereas interest always accrues on all loan types during forbearance.

Unexpected financial challenges can happen to anyone, whether you are a recent graduate navigating the job market or a parent managing Plus loans alongside household expenses. Knowing how to pause your payments without derailing your financial future is a critical skill. In this guide, you will learn the specific eligibility requirements for each option, exactly how interest impacts your total loan cost, and a step-by-step decision framework to help you choose the right path for your situation.

While the terms are often used interchangeably, choosing the wrong one can cost you thousands of dollars over the life of your loan. This article focuses on federal student loan options, as private lenders have different policies regarding payment pauses. By understanding these distinctions, you can make a choice that provides immediate relief while protecting your long-term financial health.

Quick context: when payment pauses make sense

Life rarely follows a straight line, and there are valid reasons to hit the pause button on your student loan payments. Common situations where borrowers seek relief include sudden job loss, medical emergencies, a return to graduate school, economic hardship, or military service. These tools are designed to be safety nets, preventing delinquency and default during temporary periods of instability.

Generally, deferment is the preferred option because of its potential interest subsidies, but it requires meeting specific, documented criteria such as unemployment or enrollment in an eligible program. Forbearance is broader and often easier to access for general financial difficulties, but it comes with a higher long-term cost. Before requesting either, it is important to understand a key financial concept: capitalization.

Capitalization adds unpaid interest to your principal balance, meaning you will pay interest on a larger amount going forward. This “interest on interest” effect is why a temporary pause can result in a permanently higher monthly payment once repayment resumes.

It is also vital to recognize that deferment and forbearance are intended for short-term relief. If you are facing ongoing financial difficulty where your income doesn’t support your standard payments, an income-driven repayment (IDR) plan might be a better solution. IDR plans adjust your monthly payment based on your earnings—sometimes as low as $0—while keeping your loan in good standing and counting toward forgiveness.

Forbearance vs. deferment: side-by-side comparison

To help you quickly identify which option might fit your needs, the table below outlines the fundamental differences between deferment and forbearance. While both stop your monthly bills, the financial impact varies significantly based on your loan type.

Source: StudentAid.gov

Use this comparison as a starting point. If you have subsidized loans, deferment is almost always the superior financial choice. If you have only unsubsidized or PLUS loans, the interest cost is similar for both options, so your decision will depend on eligibility and duration limits.

What is student loan deferment?

Student loan deferment is a specific, authorized period during which you are not required to make loan payments. It is distinct because, for certain loan types, the federal government covers the interest charges on your behalf while the payments are paused. This feature makes deferment the gold standard for payment relief if you are eligible.

Mechanically, deferment works by freezing your repayment obligation without triggering negative consequences like delinquency or default. You must request it from your loan servicer and typically provide proof that you meet the criteria. Once approved, your billing statements stop for the designated period.

The most critical aspect of deferment is how it treats interest based on the type of loan you hold. According to StudentAid.gov, the government pays the interest during deferment for:

• Direct Subsidized Loans
• Subsidized Federal Stafford Loans
• Federal Perkins Loans

If you have these loans, your balance will be exactly the same at the end of the deferment as it was at the start. However, for Direct Unsubsidized Loans, Direct PLUS Loans (for parents or graduate students), and Unsubsidized Stafford Loans, you remain responsible for all interest that accrues. If you do not pay this interest during the deferment period, it may be capitalized (added to your principal balance) when repayment resumes.

Because of the potential interest subsidy, you should always investigate your eligibility for deferment before considering other options. It effectively hits “pause” on your debt without the penalty of ballooning balances for subsidized loans. For a broader look at how these loan types function, you can review our federal student loans overview.

Deferment eligibility requirements and types

Deferment is not automatic; you must qualify for one of the specific categories established by the Department of Education. Each type addresses a particular life phase or challenge, and they come with different time limits.

According to StudentAid.gov, the primary types of deferment available to federal borrowers include:

• In-School Deferment: You are eligible if you are enrolled at least half-time at an eligible college or career school. This is often applied automatically if your school reports your enrollment status. There is no time limit as long as you remain enrolled half-time.
• Unemployment Deferment: Available if you are receiving unemployment benefits or are actively seeking full-time employment. You can receive this deferment for up to three years cumulatively.
• Economic Hardship Deferment: You may qualify if you are receiving a means-tested benefit (like TANF or SSI), serving in the Peace Corps, or working full-time but earning less than 150% of the poverty guideline for your family size and state. This is also limited to three years cumulatively.
• Military Service and Post-Active Duty Deferment: Available to borrowers on active duty military service during a war, military operation, or national emergency. It can also apply for a period following the conclusion of active duty service.
• Graduate Fellowship Deferment: For students enrolled in an approved graduate fellowship program.
• Cancer Treatment Deferment: Available while you are undergoing cancer treatment and for six months after treatment concludes.
• Rehabilitation Training Deferment: For borrowers enrolled in an approved rehabilitation training program for individuals with disabilities and receiving vocational rehabilitation services.

Documentation is key for all these categories. You will likely need to submit forms certified by an authorized official (like a doctor, commanding officer, or school registrar) to prove your status.

What is student loan forbearance?

Student loan forbearance is a temporary postponement or reduction of your student loan payments granted by your loan servicer. While it provides immediate cash flow relief similar to deferment, there is a fundamental financial difference: interest accrues on ALL loan types during forbearance, including subsidized loans.

Forbearance is generally easier to obtain than deferment because it covers a broader range of financial difficulties. It acts as a bridge during tough times when you don’t fit into the strict boxes required for deferment. According to StudentAid.gov, there are two main categories of forbearance:

• General (Discretionary) Forbearance: This is granted at the discretion of your loan servicer. You request it based on financial difficulties, medical expenses, or changes in employment. Your servicer decides whether to approve your request.
• Mandatory Forbearance: For these situations, your loan servicer must grant the forbearance if you meet the eligibility criteria and provide the necessary documentation.

It is crucial to understand the cost implication here. Because the government never covers interest during forbearance, your loan balance will grow every single day payments are paused. At the end of the forbearance period, any unpaid interest is typically capitalized. This means a borrower with subsidized loans who chooses forbearance over deferment is voluntarily accepting a higher cost of borrowing.

Forbearance eligibility requirements

Forbearance is designed to be a safety net when other options aren’t available. Understanding the two categories helps you know what you can request and what you are entitled to.

You may request general forbearance if you are experiencing financial difficulties that make making payments a struggle. Common reasons include:

• Financial hardship due to unexpected expenses
• Medical expenses not covered by insurance
• Change in employment or income reduction
• Divorce or other personal difficulties affecting finances

According to StudentAid.gov, general forbearance is typically granted for no more than 12 months at a time, with a cumulative limit of 3 years on Direct Loans and FFEL Program loans.

Your servicer is required to grant forbearance in specific situations, provided you submit the proper documentation. According to StudentAid.gov, you are eligible for mandatory forbearance if you are:

• Serving in a medical or dental internship or residency program (and meet specific requirements).
• Serving in a national service position (like AmeriCorps) for which you received a national service award.
• Performing teaching service that would qualify for Teacher Loan Forgiveness.
• Qualifying for partial repayment of your loans under the U.S. Department of Defense Student Loan Repayment Program.
• A member of the National Guard and have been activated by a governor, but are not eligible for a military deferment.
• The 20% Rule: The total amount you owe each month for all federal student loans is 20% or more of your total monthly gross income (for up to three years).

How interest accrues: the real cost difference

The decision to pause payments should never be made without calculating the cost. The mechanics of interest accrual and capitalization can turn a short-term break into a long-term burden.

When you are in forbearance (or deferment on unsubsidized loans), interest continues to accumulate daily. If you do not pay this interest as it accrues, it remains “unpaid interest.” When your payment pause ends, this unpaid interest is often capitalized—added to your principal balance. From that day forward, you pay interest on the original loan amount plus the interest that accumulated during the break.

Let’s look at the numbers. Imagine you have $35,000 in student loans with an interest rate of 6.53% (a typical rate for recent undergraduate loans). You need to pause payments for 12 months.

• Scenario A (Deferment on Subsidized Loans): The government pays the interest. You resume repayment with a balance of $35,000. Cost of pause: $0.
• Scenario B (Forbearance or Unsubsidized Deferment): Interest accrues at roughly $190 per month. Over 12 months, that is approximately $2,286 in accrued interest.

If that $2,286 is capitalized, your new principal balance becomes $37,286. You will now be charged interest on this higher amount for the remaining life of the loan. Over a standard 10-year repayment term, that capitalization could cost you hundreds of additional dollars on top of the $2,286 you already added.

According to Sandy Baum, a higher education economist, “Borrowing is not inherently bad; the question is how much, and under what terms.” Understanding these terms allows you to mitigate damage. If you must use forbearance, consider making interest-only payments during the pause. This prevents the balance from growing and avoids the compounding effect of capitalization.

How to apply: documentation and process

Applying for a payment pause is a straightforward process, but it requires attention to detail to ensure your request is approved quickly.

Your loan servicer is the company that handles your billing. If you aren’t sure who your servicer is, log in to your dashboard at StudentAid.gov to find out. You will submit your request directly to them.

For Deferment:

• Most deferments require a specific application form.
• You must provide documentation. For example, unemployment deferment requires proof of unemployment benefits or registration with an employment agency. In-school deferment requires enrollment verification from your university (though this is often automatic).
• Processing typically takes 2-4 weeks.

For Forbearance:

• General forbearance can often be requested over the phone or through your servicer’s online portal without extensive paperwork.
• Mandatory forbearance requires specific documentation proving your eligibility (e.g., a statement of total monthly debt and income for the 20% rule).
• Approvals are often faster than deferment requests.

This is the most critical step. Do not stop making payments until you receive written confirmation that your deferment or forbearance has been approved. Stopping early can lead to delinquency, late fees, and negative marks on your credit report.

Which option should you choose? A decision framework

With the rules and costs in mind, you can use this simple framework to decide the best path for your specific situation.

Always start here. Ask yourself: Do I meet the criteria for unemployment, economic hardship, or in-school deferment? If yes, this is likely your best option, especially if you have subsidized loans. The interest savings are too valuable to pass up.

Log into your account and see if your loans are “Subsidized” or “Unsubsidized.”

• If Subsidized: Fight for deferment. Forbearance will cost you money that deferment would save you.
• If Unsubsidized: The financial difference is smaller since interest accrues in both cases. Deferment is still preferable if you qualify (it preserves your forbearance time limits for later), but forbearance is an acceptable backup.

How long will you need relief? If you need a pause for several years (e.g., returning to school or long-term unemployment), deferment offers longer cumulative limits (up to 3 years for some types). General forbearance is capped at 12 months at a time.

If you can afford to pay something, or if your hardship is likely to last a long time, a payment pause might be the wrong tool. An income-driven repayment (IDR) plan could lower your payment to a manageable amount based on your income, keeping you on track for forgiveness.

Impact on loan forgiveness and long-term considerations

Pausing your payments can have a significant ripple effect if you are pursuing loan forgiveness programs. It is essential to understand how these months of non-payment are counted—or not counted.

Public Service Loan Forgiveness (PSLF): According to StudentAid.gov, time spent in deferment or forbearance generally does not count toward the 120 qualifying payments required for PSLF. Pausing payments simply delays your forgiveness date. However, there are exceptions: for example, the specific cancer treatment deferment and military service deferment may count. For most borrowers, switching to an IDR plan is superior because a $0 monthly payment on an IDR plan does count as a qualifying payment.

IDR Forgiveness: Similar to PSLF, months spent in forbearance generally do not count toward the 20 or 25 years needed for IDR forgiveness. While one-time account adjustments have given credit for past forbearance in recent years, moving forward, you should assume that pausing payments pauses your progress toward forgiveness.

Teacher Loan Forgiveness: Interestingly, you may be able to use forbearance while completing your five years of teaching service without resetting the clock, provided you complete the service requirement. Always verify this with your servicer.

Regarding your credit score, neither deferment nor forbearance is reported negatively. Your loans will appear as “current” on your credit report, which preserves your creditworthiness for other financial needs. See our PSLF guide for more details on maintaining eligibility.

Common mistakes to avoid

Navigating these options can be tricky. Here are the most common pitfalls borrowers encounter so you can avoid them:

• Choosing forbearance when eligible for deferment: This is the most costly error. Don’t leave interest subsidies on the table.
• Using forbearance as a long-term solution: If you are struggling for more than a year, IDR is usually a better strategic move than renewing forbearance repeatedly.
• Stopping payments too soon: Never assume your request is approved. Wait for the official notice to avoid accidental delinquency.
• Ignoring interest entirely: Even if you can’t make full payments, paying just the interest amount each month prevents your balance from ballooning.
• Ghosting your servicer: If your deferment expires, don’t just stop paying. Contact your servicer immediately to renew it or switch plans.
• Confusing private and federal rules: Remember that private student loans do not have the same rights to deferment or forbearance. You must contact private lenders individually to ask for help. Learn more in our private student loans guide.

Alternatives to consider before requesting a payment pause

Before you commit to pausing payments, consider if there is a way to lower them instead. Keeping your loans in repayment status is almost always better for your financial health.

Income-Driven Repayment (IDR): These plans cap your payments at a percentage of your discretionary income. If you have no income, your payment could be $0. Crucially, these $0 “payments” keep you in good standing and count toward forgiveness timelines. For ongoing hardship, IDR is superior to forbearance.

Refinancing: If you have private student loans or high-interest federal loans and strong credit (or a cosigner), refinancing might lower your interest rate and monthly payment. However, be careful: refinancing federal loans turns them into private loans, causing you to lose access to federal deferment, forbearance, and forgiveness options.

According to Betsy Mayotte, a student loan expert, “In general, federal loans should be your first stop, but private loans can be appropriate when you’ve maxed out your federal eligibility.” This logic applies to managing debt as well—exhaust your federal flexibility (like IDR) before seeking external solutions like refinancing.

For more on these strategies, explore our guide to student loan refinancing.

Frequently asked questions

Can I switch from forbearance to deferment?
Yes. If your circumstances change and you become eligible for deferment (e.g., you lose your job after being in forbearance), you can apply for deferment. Contact your servicer to make the switch and save on interest.

Does forbearance or deferment hurt my credit score?
No. As long as you apply and are approved before you miss a payment, your loans are reported as “current.” It does not leave a negative mark like a default or delinquency would.

Can I make payments during a pause?
Absolutely. You are encouraged to make payments of any amount during deferment or forbearance. Paying even a small amount reduces the interest that will be capitalized later.

How many times can I request forbearance?
According to StudentAid.gov, general forbearance is typically granted for 12 months at a time, with a cumulative limit of 3 years on most federal loans. Mandatory forbearance is renewed annually but can continue as long as you meet eligibility criteria.

Do private student loans have forbearance?
Policies vary by lender. Many offer short-term forbearance for economic hardship (often 3-12 months total over the life of the loan), but they are not required to do so by law. You must ask your lender specifically.

Financial setbacks are often temporary, and the federal student loan system offers robust tools to help you bridge the gap. By choosing the right option, you can protect your credit and your wallet.

• Prioritize Deferment: It is usually the better financial choice, especially if you have subsidized loans, as the government may pay your interest.
• Use Forbearance Cautiously: It is a helpful safety net if you don’t qualify for deferment, but be aware that interest accrues on all loan types.
• Consider IDR First: For lasting financial challenges, an Income-Driven Repayment plan is often superior to pausing payments entirely.
• Keep Paying: Continue making payments until you have written confirmation that your request is approved.
• Mitigate Costs: If possible, pay the accruing interest during your pause to avoid capitalization and “interest on interest.”

Your next steps:

1. Log in to StudentAid.gov to confirm your loan types (Subsidized vs. Unsubsidized).
2. Check the eligibility criteria in this guide to see if you qualify for deferment.
3. Contact your loan servicer immediately to discuss your options.
4. Submit your request in writing and keep a copy of all documentation.

References and resources

• StudentAid.gov – The official portal for federal student loans, servicer lookups, and online applications for deferment and forbearance.
• Consumer Financial Protection Bureau (CFPB) – Resources for understanding borrower rights and filing complaints against servicers.
• Federal Student Aid Information Center – 1-800-4-FED-AID (1-800-433-3243) for direct support.
• Income-Driven Repayment Guide – College Finance’s deep dive into payment plans based on income.
• Federal Student Loans Hub – Comprehensive information on federal loan types and benefits.
• PSLF Guide – Detailed rules on Public Service Loan Forgiveness eligibility.