Deferment vs. Forbearance: What's the Best Option for Student Loan Borrowers?
Whether you are going back to school or unable to make your monthly student loan payments due to special circumstances, you are probably wondering what your options are. Remember that despite what your circumstance might be, it is always important to contact your lender/or servicer for any changes or questions you may have on your student loans. Your lender is there to help you and inform you on what the best option is for your specific situation. They will supply you with the proper paperwork you need to fill out and help you determine what repayment options are available.
Under certain circumstances, you may be eligible for a deferment or forbearance on your federal student loans. This will allow you to temporarily postpone or reduce your monthly payments and in some cases help you avoid going into default.
Deferment is a temporary delay where the principal balance of your student loans does not have to be paid. Depending on the type of loan(s) you have, the government may also pay the interest on them while being deferred. Qualifying for deferment may be automatic based on whether you are enrolled half time or more at an eligible post-secondary school, unemployed, have minimum income, or are serving in the army or community. In order to request a deferment you will need to contact the financial aid office at the school you are attending as well as your lender/or servicer. They will give you the documentation necessary to complete your deferment request.
(Download Federal Loan Deferment forms here.)
If you do not qualify for deferment you may qualify for forbearance. Forbearance is when you are granted permission by your lender to stop making payments or to lower your monthly payments on your federal student loans for up to 12 months. If you qualify for forbearance, interest will accrue on your subsidized and unsubsidized loans. (Watch How to Use Forbearance on Your Student Loans.)
Forbearance is much easier to qualify for but the student will end up paying more on the loan then originally required due to the amount of interest accrued. In order to apply for forbearance you must contact your loan servicer. Be prepared to supply them with any paperwork or documentation they may need to process your request.
(Download Federal Loan Forbearance forms here.)
Pros and Cons
Here is a quick look at the pro’s and con’s of forbearance and deferment as potential solutions to your student loan payment difficulties:
All information in this table courtesy of the U.S. Department of Education Federal Student Aid Office
What is the Best Choice?
When comparing the options, deferment on your federal student loans will always be the best choice because of the interest paid by the government. Should you not qualify for deferment, forbearance is the next best step in postponing your payments. If you are unable to make your student loan payments for any reason at all, always contact your lender. They are there to help and are willing to assist you in any way they know how.
Until you have been approved for a deferment or forbearance you must continue paying your student loans unless instructed otherwise. If you do not qualify for either of these options your lender may allow you to change your payment plan. By doing so, making smaller monthly payments will help get you back on your feet and avoid any chances of going into default.
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