Forbearance, deferment, and forgiveness all have some element of not making payments on your student loan. If deciphering the difference seems a bit challenging, read on as we break it down!
What is Loan Forbearance?
Loan forbearance provides you the opportunity to suspend loan payments temporarily for no more than 12 months at a time. Typically, people choose to do so in times of severe financial stress.
While payments are postponed, you will not be responsible for paying the interest that is accruing. When the forbearance period ends, you will be responsible for that interest however.
Federal Student Loan Forbearance
With a federal loan servicer, you can request a general forbearance for up to 12 months for a Direct, FFEL, or Perkins loan. If your financial hardship continues after the 12 month period, you can request an additional forbearance of up to 12 months. Borrowers are allowed 12 months of forbearance at any given time, but can only request forbearance up to 3 years total.
Whether or not you are granted a forbearance is at the discretion of the loan servicer. Oftentimes, for situations such as unexpected major medical expenses, unemployment, or intense financial difficulty that prevents the borrower from making loan payments, forbearance will be granted.
You can request a general forbearance by calling the loan servicer or filling out a form online, however, the specific process may differ from lender to lender.
Private Loan Forbearance
Private lenders are generally less flexible when it comes to forbearance. This makes sense with what we know about private lenders (less favorable loan terms, higher interest rates, etc.) in comparison to federal loans.
Some private lenders will grant you forbearance for similar circumstances that prevent you from making loan payments. However, these forbearance periods typically come in 2 month increments and cannot exceed 12 months total (quite different from federal forbearance!). Additionally, private lenders may charge a fee for each month you are in forbearance.
What is Loan Deferment?
Similar to loan forbearance, loan deferment allows you to temporarily postpone loan payments.
The difference between loan forbearance and deferment is that in deferment, you may be responsible for still paying the interest that accrues during the deferment period.
For example, even if you aren’t paying your typical $125/month loan payment, you will still be required to keep paying the $25/month in interest. (random numbers just for example’s sake!)
Federal Student Loan Deferment
Some federal loans will require you to pay interest during the deferment period, and others will not. Here’s a full breakdown1:
Federal Loan Types That Will Not Require You to Pay Interest in Deferment:
- Direct Subsidized loans
- Subsidized Federal Stafford loans
- Federal Perkins loans
- Subsidized portion of Direct Consolidation loans
- Subsidized portion of FFEL Consolidation loans
Federal Loan Types That Will Require You to Pay Interest in Deferment:
- Direct Unsubsidized loans
- Unsubsidized Federal Stafford loans
- Direct PLUS loans
- Federal Family Education Loan (FFEL) PLUS loans
- Unsubsidized portion of Direct Consolidation loans
- Unsubsidized portion of FFEL Consolidation loans
With a federal loan deferment, there are various circumstances that would make a borrower eligible, such as:
- Cancer treatment deferment
- Economic hardship deferment
- Graduate fellowship deferment
- In-school deferment
- Military service and post-active duty student deferment
- Parent PLUS borrower deferment
- Rehabilitation training deferment
- Unemployment deferment
You can request a federal loan deferment by submitting a request form to your loan servicer.
Private Loan Deferment
Private student loan deferment is a bit more complicated. Many lenders do offer some form of deferment, although it doesn’t look quite like it does for federal loans.
Many private lenders will offer assistance programs first such as relief while in school. Even with that, the interest on the loan will continue to accrue and capitalize at the end of the deferment period. You can lessen this interest by paying interest-only payments while it accrues, however, this isn’t always accessible if deferring for financial reasons.
To defer a private student loan, you’ll need to contact your individual lender as the process varies. Typically, it will require the submission of a form to see if you are eligible.
What is Loan Forgiveness?
Loan forgiveness has become an especially hot topic ever since President Joe Biden announced his desire to forgive a portion of the federal student loan debt.
Loan forgiveness means that you are no longer required to repay some or all of your loans. (Yup, free of student debt.)
Loan forgiveness programs have existed well before Biden’s announcement of such and come in a variety of forms, typically via federal student loan programs such as:
- Public Service Loan Forgiveness
- Teacher Loan Forgiveness
- Closed School Discharge
- Perkins Loan Cancellation and Discharge
- Total and Permanent Disability Discharge
- Discharge Due to Death
- Discharge in Bankruptcy
- Borrower Defense to Repayment
- False Certification Discharge
- Unpaid Refund Discharge
We won’t do a deep dive into each one of these as some are fairly uncommon in comparison to the others. One of the most common forgiveness programs, however, is the Public Service Loan Forgiveness Program (PSLF).
Public Service Loan Forgiveness Program (PSLF)
The Public Service Loan Forgiveness Program offers loan forgiveness for borrowers with federal Direct Loans that pursue employment by a government or not-for-profit organization. Borrowers that are accepted will only be responsible for making 120 qualifying monthly payments on their loan while working full-time for their qualifying employer. After those payments, PSLF forgives the remaining loan balance.
It’s important to note that not everyone who applies will be granted loan forgiveness. Some resources state that only 2.41% of applicants are granted forgiveness through the PSLF program.
Federal vs. Private Loan Forgiveness
When discussing loan forgiveness, people are often referring to federal loan forgiveness. At this time, there aren’t many, if any, systems in place for private loan forgiveness.
Student loan rates from our partners
Ascent
Ascent’s undergraduate and graduate student loans are funded by Bank of Lake Mills, or DR Bank, each Member FDIC. Loan products may not be available in certain jurisdictions. Certain restrictions, limitations; and terms and conditions may apply. For Ascent Terms and Conditions please visit: www.AscentFunding.com/Ts&Cs. Rates are effective as of 11/1/2024 and reflect an automatic payment discount of either 0.25% (for credit-based loans) OR 1.00% (for undergraduate outcomes-based loans). Automatic Payment Discount is available if the borrower is enrolled in automatic payments from their personal checking account and the amount is successfully withdrawn from the authorized bank account each month. For Ascent rates and repayment examples please visit: AscentFunding.com/Rates. 1% Cash Back Graduation Reward subject to terms and conditions. Cosigned Credit-Based Loan student must meet certain minimum credit criteria. The minimum score required is subject to change and may depend on the credit score of your cosigner. Lowest rates require full
principal and interest payments, the shortest loan term, a cosigner, and are only available for our most creditworthy applicants and cosigners with the highest average credit scores. Actual APR offered may be higher or lower than the repayment examples above, based on the amount of time you spend in school and any grace period you have before repayment begins.
Ascent’s undergraduate and graduate student loans are funded by Bank of Lake Mills, or DR Bank, each Member FDIC. Loan products may not be available in certain jurisdictions. Certain restrictions, limitations; and terms and conditions may apply. For Ascent Terms and Conditions please visit: www.AscentFunding.com/Ts&Cs. Rates are effective as of 11/1/2024 and reflect an automatic payment discount of either 0.25% (for credit-based loans) OR 1.00% (for undergraduate outcomes-based loans). Automatic Payment Discount is available if the borrower is enrolled in automatic payments from their personal checking account and the amount is successfully withdrawn from the authorized bank account each month. For Ascent rates and repayment examples please visit: AscentFunding.com/Rates. 1% Cash Back Graduation Reward subject to terms and conditions. Cosigned Credit-Based Loan student must meet certain minimum credit criteria. The minimum score required is subject to change and may depend on the credit score of your cosigner. Lowest rates require full
principal and interest payments, the shortest loan term, a cosigner, and are only available for our most creditworthy applicants and cosigners with the highest average credit scores. Actual APR offered may be higher or lower than the repayment examples above, based on the amount of time you spend in school and any grace period you have before repayment begins.
LendKey
1 – Terms and Conditions Apply
Loan products, terms, and benefits may be modified or discontinued by participating lenders at any time without notice. Rates displayed are reserved for the most creditworthy consumers who enroll to make automatic monthly payments. Your initial rate will be determined after a review of your application and credit profile. Variable rates may increase after consummation. You must be either a U.S. citizen or Permanent Resident in an eligible state and from an eligible school, and meet the lender’s credit and income requirements to qualify for a loan. Certain membership requirements (including the opening of a share account, a minimum share account deposit, and the payment of any applicable association fees in connection with membership) may apply in the event that an applicant wishes to apply with, and accept a loan offered from, a credit union lender. If you are not a member of the credit union lender, you may apply and become a member during the loan application process if you meet the lender’s eligibility criteria. Applying with a creditworthy cosigner may result in a better chance of loan approval and/or lower interest rate. Loans for exam preparation classes, including, but not limited to, loans for LSAT, MCAT, GMAT, and GRE preparation, are not available via LendKey.com.
2 – Cosigner Release
Some lenders participating on LendKey.com may offer the benefit of cosigner release. Cosigner release is subject to lender approval. In order to qualify, the borrower, alone, must meet the following requirements: (1) Make the required number of consecutive, on-time full principal and interest payments as indicated in the borrower’s credit agreement during the repayment period (excluding interest-only payments) immediately prior to the request. Any period of forbearance will reset the repayment clock; (2) The account cannot be in delinquent status; (3) The borrower must provide proof of income indicating that he/she meets the income requirements and pass a credit review demonstrating that he/she has a satisfactory credit history and the ability to assume full responsibility of loan repayment; (4) No bankruptcies or foreclosures in the last sixty months; and (5) No loan defaults.
3 – Autopay Rate Reduction
Subject to floor rate and may require the automatic payments be made from a checking or savings account with the lender. The rate reduction will be removed and the rate will be increased by 0.25% upon any cancellation or failed collection attempt of the automatic payment and will be suspended during any period of deferment or forbearance. As a result, during the forbearance or suspension period, and/or if the automatic payment is canceled, any increase will take the form of higher payments.
4 – AutoPay Discount & Lowest Interest Rate
Subject to floor rate and may require the automatic payments be made from a checking or savings account with the lender. The rate reduction will be removed and the rate will be increased by 0.25% upon any cancellation or failed collection attempt of the automatic payment and will be suspended during any period of deferment or forbearance. As a result, during the forbearance or suspension period, and/or if the automatic payment is canceled, any increase will take the form of higher payments. The lowest advertised APR is only available for loan terms of 10 years and is reserved for the highest qualified applicants, taking into consideration the applicant’s credit and other factors.
1 – Terms and Conditions Apply
Loan products, terms, and benefits may be modified or discontinued by participating lenders at any time without notice. Rates displayed are reserved for the most creditworthy consumers who enroll to make automatic monthly payments. Your initial rate will be determined after a review of your application and credit profile. Variable rates may increase after consummation. You must be either a U.S. citizen or Permanent Resident in an eligible state and from an eligible school, and meet the lender’s credit and income requirements to qualify for a loan. Certain membership requirements (including the opening of a share account, a minimum share account deposit, and the payment of any applicable association fees in connection with membership) may apply in the event that an applicant wishes to apply with, and accept a loan offered from, a credit union lender. If you are not a member of the credit union lender, you may apply and become a member during the loan application process if you meet the lender’s eligibility criteria. Applying with a creditworthy cosigner may result in a better chance of loan approval and/or lower interest rate. Loans for exam preparation classes, including, but not limited to, loans for LSAT, MCAT, GMAT, and GRE preparation, are not available via LendKey.com.
2 – Cosigner Release
Some lenders participating on LendKey.com may offer the benefit of cosigner release. Cosigner release is subject to lender approval. In order to qualify, the borrower, alone, must meet the following requirements: (1) Make the required number of consecutive, on-time full principal and interest payments as indicated in the borrower’s credit agreement during the repayment period (excluding interest-only payments) immediately prior to the request. Any period of forbearance will reset the repayment clock; (2) The account cannot be in delinquent status; (3) The borrower must provide proof of income indicating that he/she meets the income requirements and pass a credit review demonstrating that he/she has a satisfactory credit history and the ability to assume full responsibility of loan repayment; (4) No bankruptcies or foreclosures in the last sixty months; and (5) No loan defaults.
3 – Autopay Rate Reduction
Subject to floor rate and may require the automatic payments be made from a checking or savings account with the lender. The rate reduction will be removed and the rate will be increased by 0.25% upon any cancellation or failed collection attempt of the automatic payment and will be suspended during any period of deferment or forbearance. As a result, during the forbearance or suspension period, and/or if the automatic payment is canceled, any increase will take the form of higher payments.
4 – AutoPay Discount & Lowest Interest Rate
Subject to floor rate and may require the automatic payments be made from a checking or savings account with the lender. The rate reduction will be removed and the rate will be increased by 0.25% upon any cancellation or failed collection attempt of the automatic payment and will be suspended during any period of deferment or forbearance. As a result, during the forbearance or suspension period, and/or if the automatic payment is canceled, any increase will take the form of higher payments. The lowest advertised APR is only available for loan terms of 10 years and is reserved for the highest qualified applicants, taking into consideration the applicant’s credit and other factors.
Earnest
Student Loan Origination (Private Student Loan) Interest Rate Disclosure:
Student Loan Origination (Private Student Loan) Interest Rate Disclosure:
College Ave
College Ave Student Loans products are made available through Firstrust Bank, member FDIC, First Citizens Community Bank, member FDIC, or M.Y. Safra Bank, FSB, member FDIC. All loans are subject to individual approval and adherence to underwriting guidelines. Program restrictions, other terms, and conditions apply.
(1) All rates include the auto-pay discount. The 0.25% auto-pay interest rate reduction applies as long as a valid bank account is designated for required monthly payments. If a payment is returned, you will lose this benefit. Variable rates may increase after consummation.
(2) As certified by your school and less any other financial aid you might receive. Minimum $1,000.
(3) This informational repayment example uses typical loan terms for a freshman borrower who selects the Flat Repayment Option with an 8-year repayment term, has a $10,000 loan that is disbursed in one disbursement and a 7.78% fixed Annual Percentage Rate (“APR”): 54 monthly payments of $25 while in school, followed by 96 monthly payments of $176.21 while in the repayment period, for a total amount of payments of $18,266.38. Loans will never have a full principal and interest monthly payment of less than $50. Your actual rates and repayment terms may vary.
Information advertised valid as of 11/1/2024. Variable interest rates may increase after consummation. Approved interest rate will depend on creditworthiness of the applicant(s), lowest advertised rates only available to the most creditworthy applicants and require selection of the Flat Repayment Option with the shortest available loan term.
College Ave Student Loans products are made available through Firstrust Bank, member FDIC, First Citizens Community Bank, member FDIC, or M.Y. Safra Bank, FSB, member FDIC. All loans are subject to individual approval and adherence to underwriting guidelines. Program restrictions, other terms, and conditions apply.
(1) All rates include the auto-pay discount. The 0.25% auto-pay interest rate reduction applies as long as a valid bank account is designated for required monthly payments. If a payment is returned, you will lose this benefit. Variable rates may increase after consummation.
(2) As certified by your school and less any other financial aid you might receive. Minimum $1,000.
(3) This informational repayment example uses typical loan terms for a freshman borrower who selects the Flat Repayment Option with an 8-year repayment term, has a $10,000 loan that is disbursed in one disbursement and a 7.78% fixed Annual Percentage Rate (“APR”): 54 monthly payments of $25 while in school, followed by 96 monthly payments of $176.21 while in the repayment period, for a total amount of payments of $18,266.38. Loans will never have a full principal and interest monthly payment of less than $50. Your actual rates and repayment terms may vary.
Information advertised valid as of 11/1/2024. Variable interest rates may increase after consummation. Approved interest rate will depend on creditworthiness of the applicant(s), lowest advertised rates only available to the most creditworthy applicants and require selection of the Flat Repayment Option with the shortest available loan term.
Summary
While we all certainly hope that moves are made in regards to forgiving our student debt, forbearance or deferment might be the most viable option if experiencing financial hardship that prevents you from making loan payments.
Neither deferment nor forbearance will impact your credit score as both are done with the approval of your lender. So, know that whatever decision you make, it will be okay. We’ve got your back.