Deferment and forbearance are the two ways to legally pause payments on federal student loans, and the difference between them can cost you thousands of dollars. Deferment is cheaper: the government covers interest on your subsidized loans while payments are paused, and more of the qualifying categories count toward loan forgiveness. Forbearance is easier to get but more expensive: interest accrues on every loan type and usually gets added to your principal when the pause ends. If you qualify for deferment, take deferment. If you don’t, forbearance is still better than missing payments, but it’s rarely the best option available to you.
The Core Difference in One Look
Three things separate these two pauses, and all three run in deferment’s favor.
- Interest on subsidized loans: The government pays it during deferment. You owe it during forbearance.
- Who decides: Deferment is granted when you meet a defined federal category. General forbearance is granted at your servicer’s discretion.
- Forgiveness credit: Several deferment types count toward Public Service Loan Forgiveness if you’re employed by a qualifying employer. Most forbearance months don’t, though a few specific types do.
Everything else, time limits, how you apply, the effect on your credit, flows from those three.
When You Qualify for Deferment
Deferment eligibility is set by federal regulation, and your servicer has no room to improvise. You either fit a category or you don’t. The main ones:
- In-school: You’re enrolled at least half-time at an eligible school. Usually applied automatically from enrollment data.
- Unemployment: You’re receiving unemployment benefits or actively searching for full-time work. Capped at three cumulative years.1eCFR. 34 CFR 685.204 – Deferment
- Economic hardship: You’re on federal or state public assistance, or working full-time but earning less than 150% of the federal poverty guideline for your family size. Capped at 36 cumulative months.2Federal Student Aid. Economic Hardship Deferment Request
- Military service: You’re on active duty or in a qualifying post-service period.
- Cancer treatment: You’re in active treatment. Covers the treatment period plus six months, with no fixed cap.3Federal Student Aid. Deferment for Cancer Treatment for Direct Loan, FFEL, and Perkins Loan Program Borrowers
- Graduate fellowship: You’re enrolled in a full-time graduate fellowship program.
Each category requires its own documentation: a benefits award letter, military orders, a physician’s certification, income records.4Federal Student Aid. Deferment and Forbearance If you can produce it, deferment is almost always the right call.
When Forbearance Is Your Option
Forbearance is the fallback when no deferment category fits. It comes in two forms.
General forbearance covers financial difficulty, illness, or other hardship that doesn’t match a deferment category. Your servicer decides whether to grant it based on documentation you provide, like pay stubs, bank statements, or a written explanation. It’s issued in increments of up to 12 months and capped at three years over the life of your loans.
Mandatory forbearance is one your servicer has to grant if you qualify. The two most common triggers are a monthly federal student loan payment totaling 20% or more of your gross monthly income,5eCFR. 34 CFR 685.205 – Forbearance and service as a medical or dental intern or resident. Mandatory forbearance also exists for AmeriCorps members, National Guard members activated by a governor who don’t meet military deferment criteria, participants in the Department of Defense student loan repayment program, and teachers whose expected Teacher Loan Forgiveness amount would cover their remaining eligible balance.6Federal Student Aid. Teacher Loan Forgiveness Forbearance Request
What Each One Actually Costs You
Here’s where the two options separate on your statement.
During deferment, the federal government pays the interest on Direct Subsidized Loans. Your balance stays flat. For Direct Unsubsidized Loans and PLUS Loans, interest still accrues and you’re responsible for it.7Office of the Law Revision Counsel. 20 USC 1087e – Terms and Conditions of Loans
During forbearance, interest accrues on every loan type, subsidized included. The government covers none of it. You can pay the interest as it accrues, and if you can manage it you should. If you don’t, that unpaid interest gets added to your principal when the forbearance ends, a process called capitalization. From then on, you’re paying interest on a bigger balance.
The math gets real quickly. On a $30,000 loan at 5.5%, a single year of forbearance with full capitalization adds roughly $1,650 to your principal, and you then pay interest on that extra $1,650 for the remaining 10 to 20 years of your repayment term. One exception worth knowing: Teacher Loan Forgiveness forbearance does not capitalize interest on Direct Loans.6Federal Student Aid. Teacher Loan Forgiveness Forbearance Request
One smaller cost applies to both: if you’ve been receiving the 0.25% interest rate reduction for automatic payments, it pauses during deferment or forbearance because nothing is being auto-debited. It should resume when active repayment restarts.
What Each Does to Loan Forgiveness
If you’re pursuing Public Service Loan Forgiveness or forgiveness under an income-driven repayment plan, the choice between deferment and forbearance has consequences that may not show up for years.
Public Service Loan Forgiveness
PSLF requires 120 qualifying monthly payments while you work full-time for a qualifying employer. Most deferment and forbearance months don’t count, but several specific types do: cancer treatment deferment, economic hardship deferment, military service deferment, post-active-duty deferment, AmeriCorps forbearance, National Guard forbearance, Department of Defense repayment program forbearance, and certain administrative forbearances.8eCFR. 34 CFR 685.219 – Public Service Loan Forgiveness Program Notice how many of those are deferments. General forbearance is not on the list.
For months that don’t count, PSLF offers a buyback option once you already have 120 months of qualifying employment on record. You pay a lump sum, calculated based on what you would have owed under an income-driven plan at the time, and those months convert into qualifying payments. You have 90 days to pay after receiving the agreement.9Federal Student Aid. Public Service Loan Forgiveness Buyback
Income-Driven Repayment Forgiveness
Under income-driven plans, your remaining balance is forgiven after 20 or 25 years of qualifying payments. Months in forbearance don’t count. Months in most deferment types don’t count either. The clock stops.
Why an Income-Driven Plan Often Beats Forbearance
Before you request forbearance, check whether you qualify for an income-driven repayment plan. If your income is low, your required monthly payment can be as little as $0, and that $0 still counts as a qualifying payment toward forgiveness. You also avoid the capitalization that makes forbearance expensive.
Forbearance stops the forgiveness clock. A $0 IDR payment keeps it running. If you’re pursuing PSLF or IDR forgiveness and your income is low enough to qualify, IDR almost always wins.
One current wrinkle: borrowers who were enrolled in the SAVE Plan or had pending applications were placed into forbearance after a federal court blocked parts of the IDR formulas. The Department of Education is requiring those borrowers to select a different repayment plan; if you don’t, your servicer picks one for you.10Federal Student Aid. IDR Court Actions Sitting in that administrative forbearance without acting means interest is accumulating and no month is counting toward forgiveness.
Credit Impact and the Real Worst Case
Neither deferment nor forbearance damages your credit. As long as you formally apply and get approval before missing a payment, your loans continue to be reported in good standing. Default is the outcome that hurts, and it hurts badly: it gets reported to all four major credit bureaus, triggers wage garnishment of up to 15% of your disposable pay, and allows the Treasury to seize tax refunds and some government benefits.11Federal Student Aid. Student Loan Default and Collections – FAQs
Compared to default, the interest cost of forbearance is manageable. The worst financial decision is choosing neither option and going silent.
How to Request Either One
Log into your servicer’s portal or call them. Download the appropriate form from the Federal Student Aid website or your servicer’s site, and submit it with the supporting documentation your category requires: enrollment verification, unemployment benefit letters, income records, military orders, physician certification.
Keep making your scheduled payments until you receive written confirmation that your request was approved. Servicers can take several weeks to process applications, and skipping payments during that window counts as delinquency. If your request is denied, the servicer will explain why, and you can resubmit with corrected documentation.
Once approved, you’ll get confirmation with start and end dates. Save every form and every response. If your pause is granted in a limited increment, set a reminder to reapply before it expires so you don’t lapse into delinquency between periods.
Private Loans Are Not Covered
Everything above applies only to federal student loans. If you have private student loans, you have no legal right to deferment or forbearance. Private lenders may offer hardship options, but the terms, fees, and availability depend entirely on your contract and the lender’s policies, and they’re typically less favorable than federal protections.12Consumer Financial Protection Bureau. Is Forbearance or Deferment Available for Private Student Loans Contact your lender directly, but don’t assume you’ll get what federal borrowers get.