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What Is the Difference Between Deferment and Forbearance?

Student Loan Refinance

If you are having difficulty making your student loan payments, it is essential that you know the definition of deferment and forbearance and that you understand the difference between deferment and forbearance. While every lender has slightly different rules, in general, the difference between deferment and forbearance can mean a difference of a lot of your hard earned money.

What is the Difference Between Deferment and Forbearance?

Both deferment and forbearance mean temporarily putting your student loan payments on hold. While you are allowed to continue to make payments while your loans are in deferment or forbearance, the loan company suspends your required minimum monthly payments. This means that if you are struggling to pay your bills, getting a deferment or forbearance on your loan can give you the breathing room you need. Putting your loans into deferment or forbearance is also a far better alternative to being late on payments or defaulting on student loans, since deferment and forbearance will not hurt your credit score, but late or unpaid loan payments can.

The difference between deferment and forbearance, however, comes in both the amount of interest charged while you aren't making payments and in what it takes to qualify. When your loans are put into deferment, the government subsidizes the interest on any eligible government loans. This means, for example, that if you have Stafford Loans or Perkins loan or another loan issued through a government entity with a subsidized interest rate, you will not be charged as much interest on these loans while they are in deferment. If you opt for forbearance, on the other hand, you will pay interest at the full rate on all your loans. Thus, the difference between deferment and forbearance can amount to several thousands of dollars in interest, depending on how long you suspend your payments before.

Because the interest is subsidized during a deferment, the other difference between deferment and forbearance comes in the qualifying process. Deferments are harder to qualify for. Each lender has different rules, but usually you must either be in school, demonstrate that you can't pay because you aren't making enough money, be serving in the military, or have another specific situation that falls into one of the categories they have defined for deferment. For forbearance, on the other hand, the qualification process is easier and with some lenders, all you have to do is ask for forbearance.

If you have student loans, make sure to find out the deferment and forbearance rules with your lender. if the rules are not beneficial to you, you may wish to consider refinancing your loans with a company that offers more favorable deferment and forbearance rules. if you are planning on refinancing your student loans anyway, make sure to ask about the deferment and forbearance policies.

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