Option A
Deferment
The government-backed pause with potential interest protection.
Best for: Borrowers who qualify for specific circumstances — such as returning to school, unemployment, or economic hardship — and want federal interest coverage on subsidized loans.
Option B
Forbearance
The more accessible pause that always lets interest accumulate.
Best for: Borrowers facing a short-term financial difficulty who need quick payment relief but do not meet deferment eligibility requirements.
What Deferment and Forbearance Actually Mean
When repaying student loans becomes difficult, federal loan servicers offer two ways to press pause: deferment and forbearance. Both temporarily reduce or eliminate your required monthly payment. Neither removes your debt. Understanding the difference matters because one can cost you significantly more over time.
Deferment is a postponement of payments that requires you to meet specific eligibility criteria set by the federal government. Common qualifying situations include enrollment in school at least half-time, active military service, Peace Corps participation, approved rehabilitation training, unemployment, and documented economic hardship. During deferment on subsidized federal loans, the U.S. Department of Education pays the interest that accrues — meaning your balance does not grow. On unsubsidized loans and PLUS Loans, however, interest still accumulates even during deferment. For a deeper look at how subsidized and unsubsidized loans behave differently, see how interest accrual changes everything.
Forbearance is a more flexible pause that servicers can grant even when you do not qualify for deferment. There are two types: general forbearance, which is discretionary and based on financial hardship, illness, or other reasons the servicer accepts; and mandatory forbearance, which servicers are required to grant in specific circumstances such as medical or dental internships, certain AmeriCorps positions, or when your total monthly student loan payments exceed 20% of your gross monthly income. Unlike deferment on subsidized loans, interest accrues on all loan types during forbearance without exception.
If any of these terms feel unfamiliar, the Student Loan Glossary defines key vocabulary — including capitalization, accrual, and principal — that will help you follow this comparison closely.
The Interest Problem: Why the Pause Can Still Cost You
The most important factor in choosing between these options is interest — specifically, what happens to it while you're not making payments.
| Criterion | Deferment | Forbearance |
|---|---|---|
| Eligibility | Specific qualifying criteria required | Broadly available; easier to obtain |
| Interest on subsidized loans | Government covers it — balance stays flat | Accrues — balance grows |
| Interest on unsubsidized loans | Accrues — balance grows | Accrues — balance grows |
| Maximum duration | Varies by type; up to 3 years for hardship | Typically up to 12 months at a time |
| Application process | Documentation of qualifying circumstances | Request to servicer; often less documentation |
| Counts toward IDR forgiveness | Generally no | Generally no |
Capitalization is the mechanism that makes unpaid interest expensive. When your pause period ends and unpaid interest is added to your principal balance, future interest is calculated on that larger amount. For example, if you pause payments on a $20,000 unsubsidized loan at 6.5% interest for 12 months without paying any accruing interest, roughly $1,300 in interest could capitalize — making your new principal approximately $21,300. You then pay interest on that higher balance for the remainder of your repayment term.
$1,300+
Potential interest capitalized on a $20,000 loan in one year
At a 6.5% annual interest rate, a 12-month payment pause without any interest payments can add over $1,300 to your principal balance.
3 years
Maximum economic hardship deferment period
According to Federal Student Aid (studentaid.gov), borrowers who qualify for economic hardship deferment may pause payments for up to three years total.
20%
Income threshold for mandatory forbearance eligibility
Federal regulations require servicers to grant mandatory forbearance when a borrower's total monthly student loan payments exceed 20% of their gross monthly income.
This compounding effect is one reason financial educators generally advise treating deferment and forbearance as short-term tools, not long-term strategies. If you can afford to pay even just the interest portion during a pause, doing so prevents capitalization from inflating your principal. That decision alone can save a meaningful amount over a 10-year repayment period.
For a broader view of how debt accumulation shapes financial life after college, the article on student loan debt and your financial future puts these costs in context.
How to Decide — and What to Do Instead
Before requesting either option, ask your loan servicer whether you qualify for deferment. Because deferment on subsidized loans protects you from interest growth, it is the lower-cost pause when you are eligible. If you do not qualify, forbearance may be your available option — but treat it as a bridge, not a destination.
Also worth considering: income-driven repayment (IDR) plans adjust your monthly payment to a percentage of your discretionary income — sometimes as low as $0 per month if your income is very low. Unlike forbearance, payments made under an IDR plan count toward loan forgiveness timelines. Compare IDR structures side by side in Federal Repayment Plans: A Side-by-Side Look at Your Options.
When evaluating your options, consider these practical steps:
- Contact your federal loan servicer directly and ask which deferment categories you qualify for.
- Request a written statement of how interest will be handled during any pause period.
- If you can pay any amount toward interest during the pause, do so to minimize capitalization risk.
- Set a calendar reminder to reassess your situation before the pause ends — automatic extensions are not guaranteed.
- Explore IDR plans if your hardship is likely to last longer than a few months.
For grounded principles on managing student debt across your repayment journey, Keeping Student Debt Manageable offers a steady framework to return to.
This article is for general informational and educational purposes only. It does not constitute personalized financial or legal advice. Contact your loan servicer and consider consulting a qualified financial adviser for guidance specific to your situation.
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