Deferment vs. Forbearance: Pausing Loan Payments and What Each Choice Costs You

What Deferment and Forbearance Actually Mean

Both deferment and forbearance are formal agreements with your loan servicer that temporarily suspend or reduce your required monthly loan payment. They are not the same thing, and the distinction matters most when you calculate what the pause ultimately costs you.

Deferment is a postponement of payments typically tied to specific qualifying circumstances — enrollment in school at least half-time, unemployment, economic hardship, or active military service, among others. The key financial advantage: on subsidized federal loans, the federal government pays the interest that accrues during an approved deferment period, meaning your balance does not grow.

Forbearance is a broader, more accessible pause that lenders can grant when borrowers face financial difficulty but may not meet strict deferment criteria. The trade-off is significant: interest continues to accrue on all loan types during forbearance, and in many cases that unpaid interest is capitalized — added to your principal balance — once the forbearance period ends. To understand how capitalization works in practice, see our guide to student loan terminology.

Pros and Cons of Using Deferment

Deferment is the preferable option for most federal student loan borrowers who qualify, primarily because of how it treats interest on subsidized loans.

The downsides of deferment are less obvious but still real. Deferment periods count toward the lifetime limits set by federal programs — generally up to three years for most deferment types combined. Using deferment now means fewer months available if hardship strikes again later. Additionally, deferment periods typically do not count as qualifying payments toward Public Service Loan Forgiveness or income-driven repayment forgiveness timelines. If you are pursuing PSLF, review our overview of what PSLF actually requires before requesting deferment.

The Real Cost of Forbearance Over Time

Forbearance is easier to obtain — servicers have more discretion to grant it — but that accessibility comes at a price. Interest accrues on subsidized loans, unsubsidized loans, and PLUS loans alike during forbearance periods. When the forbearance ends and that interest capitalizes, every future interest calculation is applied to a larger principal.

For example, a borrower with $30,000 in unsubsidized loans at a 6.5% interest rate accrues roughly $162 in interest per month. A 12-month forbearance adds approximately $1,944 to the balance before capitalization — and from that point forward, interest compounds on the inflated amount. The interest difference between subsidized and unsubsidized loans illustrates exactly how this compounding diverges over a repayment timeline.

Borrowers should also be aware that forbearance, like deferment, does not typically count as a qualifying repayment month for forgiveness programs. If long-term affordability is the core problem — not a short-term income gap — an income-driven repayment plan is usually a better fit than repeated forbearance.

How to Decide Which Option to Request

The decision tree is more straightforward than it might appear. Start by asking whether you meet the eligibility criteria for deferment. If you do — and especially if your loans include subsidized balances — deferment will almost always cost you less. Contact your servicer and request the specific deferment type that matches your situation; documentation is usually required.

If you do not qualify for deferment, or if you need relief immediately while gathering paperwork, forbearance can serve as a bridge. Keep the forbearance period as short as possible and make interest-only payments during the pause if your budget allows — this prevents capitalization and limits long-term damage to your balance.

In either case, use the pause to address the underlying issue: build a modest emergency fund, adjust your budget, or explore whether an income-driven plan would make regular payments more manageable going forward. Our article on paying off debt while saving simultaneously can help you weigh those priorities once you are back on track.

This article is for general informational and educational purposes only and does not constitute personalized financial or legal advice. Consult your loan servicer and, where appropriate, a qualified financial professional for guidance specific to your loan situation.