Deferment vs Forbearance: Which to Choose

If you have federal student loans and you are struggling to make payments, you have probably heard the words "deferment" and "forbearance" tossed around. Both let you temporarily stop making payments or reduce what you owe each month. But they are not the same thing, and choosing the wrong one could cost you thousands of dollars in extra interest. Whether you are a recent graduate between jobs or a parent repaying a Parent PLUS Loan, understanding the real differences will help you protect your finances when money gets tight.

What Deferment Actually Means

Deferment is a temporary pause on your loan payments that your loan servicer grants when you meet specific eligibility criteria set by the federal government. During deferment, you are not required to make monthly payments, and — depending on the type of loan — the government may cover your interest charges.

For the 2025-26 academic year, the interest rate on Direct Subsidized Loans for undergraduates is 6.53%. On Direct Unsubsidized Loans, the rate is also 6.53% for undergraduates and 8.08% for graduate students. Parent PLUS and Grad PLUS Loans carry a rate of 9.08%.

Here is the critical detail: if you have subsidized loans, the federal government pays the interest that builds up during deferment. You come out of deferment owing exactly what you owed going in. If you have unsubsidized loans or PLUS Loans, interest keeps piling up during deferment and gets added to your principal balance when the deferment ends — a process called capitalization.

Common Deferment Types

The U.S. Department of Education recognizes several deferment categories:

In-school deferment. You are enrolled at least half-time at an eligible college or university. This is automatic for most Direct Loans.
Economic hardship deferment. You are receiving federal or state public assistance, your monthly income is below 150% of the federal poverty guidelines for your state and family size, or you are serving in the Peace Corps. For 2025, 150% of the poverty guideline for a single person in the contiguous U.S. is about $22,590 per year.
Unemployment deferment. You are receiving unemployment benefits or you are actively looking for full-time work and cannot find it. This deferment lasts up to three years total.
Military service and post-active duty deferment. You are on active duty during a war, military operation, or national emergency, or you are within 13 months of returning from active duty.
Cancer treatment deferment. You are undergoing cancer treatment, plus a six-month recovery period afterward. This applies to Direct Loans and some FFEL Loans.
Graduate fellowship deferment. You are enrolled in an approved graduate fellowship program.

How to Apply for Deferment

Contact your loan servicer directly. You can find your servicer by logging into StudentAid.gov. Most deferments require you to submit a request form along with documentation — proof of enrollment, unemployment verification, or income records. Your servicer cannot grant a deferment retroactively for months you already missed, so apply as soon as you know you need help.

What Forbearance Actually Means

Forbearance also lets you pause or reduce payments, but it comes with a steeper price tag. During forbearance, interest accrues on all loan types — subsidized, unsubsidized, and PLUS. There is no government subsidy to cover it. When forbearance ends, that unpaid interest capitalizes onto your principal, and you start paying interest on top of interest.

The Federal Student Aid office describes two kinds of forbearance:

General Forbearance (Discretionary)

Your servicer decides whether to grant this based on your situation. Reasons can include financial difficulty, medical expenses, a change in employment, or any other reason your servicer accepts. General forbearance is granted in 12-month increments, and you can receive it for up to three years total.

Mandatory Forbearance

Your servicer is required to grant this if you meet certain conditions. Common triggers include:

Medical or dental internship or residency. You are in an approved program and your payments exceed 20% of your monthly gross income.
National Guard duty. You are called to active duty and your service affects your ability to repay.
Teacher loan forgiveness qualifying service. You are teaching full-time at a qualifying low-income school.
AmeriCorps service. You are serving in a qualifying AmeriCorps position.
Monthly payment exceeds income. Your total student loan payment equals or exceeds 20% of your monthly gross income, under certain Department of Defense programs.

Mandatory forbearance is also granted in 12-month increments, renewable for up to three years.

The Interest Problem: A Dollar-by-Dollar Comparison

This is where the real cost difference shows up. Let's say you owe $30,000 in Direct Subsidized Loans and $30,000 in Direct Unsubsidized Loans, all at 6.53% interest. You need to pause payments for 12 months.

Scenario A: You choose deferment.

On the $30,000 in subsidized loans, the government covers the interest. After 12 months, you still owe $30,000.
On the $30,000 in unsubsidized loans, interest accrues at 6.53%. That adds roughly $1,959 in interest over the year. If that interest capitalizes, your new balance is $31,959.
Total added cost: about $1,959.

Scenario B: You choose forbearance.

On the $30,000 in subsidized loans, interest accrues at 6.53% because the government does not cover it during forbearance. That adds about $1,959.
On the $30,000 in unsubsidized loans, interest also accrues at 6.53%, adding another $1,959.
Total added cost: about $3,918.

Over a 10-year repayment plan at 6.53%, that extra $1,959 in capitalized interest on your subsidized loans turns into roughly $2,720 in total payments when you factor in interest on the higher balance. That is money you would have kept with deferment.

Now scale that up. If you use the full three years of forbearance on $60,000 in mixed loans, you could add more than $12,000 in capitalized interest. On a standard 10-year plan, you would repay roughly $16,600 more than your original loan amount — just because of how interest compounds during forbearance.

When Deferment Is the Better Choice

Choose deferment when:

You have subsidized loans. The interest subsidy during deferment is the single biggest financial advantage. If most of your debt is in subsidized loans, deferment saves you real money.
You qualify for a specific deferment type. Going back to school, experiencing economic hardship, or serving in the military all give you clear paths to deferment with defined eligibility rules.
You need more than a few months of relief. Deferment periods can be long — in-school deferment lasts as long as you are enrolled. If your situation is not going to resolve quickly, deferment gives you a longer, cheaper runway.
You hold subsidized loans from undergrad alongside PLUS Loans. You can defer all your loans, but you will only get the interest benefit on the subsidized portion. Still better than forbearance, where everything accrues.

When Forbearance Makes More Sense

Forbearance is not always the wrong call. Choose it when:

You do not qualify for any deferment category. If your income is above the economic hardship threshold, you are employed, and you are not in school or the military, deferment may not be on the table. Forbearance is your backup option.
You need help fast. General forbearance can sometimes be processed more quickly than deferment, especially if your servicer needs time to verify deferment documentation. Some servicers can apply forbearance over the phone in a single call.
The pause is very short. If you only need one or two months of breathing room — say, between jobs — the interest cost of a brief forbearance is small. On $30,000 at 6.53%, one month of forbearance costs about $163 in interest. That might be worth it to avoid a missed payment on your credit report.
You only have unsubsidized loans. If you have zero subsidized loans, the interest treatment is the same whether you choose deferment or forbearance. In that case, whichever option you qualify for and can get approved fastest is the better pick.

A Smarter Move: Pay the Interest During Either Option

Whether you are in deferment or forbearance, you are almost always allowed to make interest-only payments. This is one of the most effective things you can do to protect yourself from ballooning balances.

On $30,000 in unsubsidized loans at 6.53%, your monthly interest charge is about $163. Paying just that amount every month prevents capitalization entirely. Over 12 months, that $163 per month ($1,959 total) saves you roughly $760 in additional interest over the remaining life of a 10-year repayment plan. If you cannot afford the full interest payment, even partial payments reduce how much capitalizes.

Ask your servicer to apply any payments you make during deferment or forbearance directly to interest, not principal. This is usually the default, but confirm it in writing.

Income-Driven Repayment: The Third Option Nobody Mentions

Before you choose deferment or forbearance, ask yourself whether an income-driven repayment (IDR) plan might be a better fit. Under plans like SAVE, IBR, PAYE, and ICR, your monthly payment is set at a percentage of your discretionary income. If your income is very low, your payment could drop to $0 per month — and that $0 payment still counts as "on-time" for purposes of loan forgiveness and credit reporting.

Here is why that matters. Under the SAVE plan, if your required payment does not cover the monthly interest, the government covers the rest — even on unsubsidized loans. For a borrower earning $32,000 per year with $40,000 in loans, the SAVE plan payment could be as low as $50-$75 per month, with the remaining interest subsidized.

IDR plans also keep the clock ticking toward Public Service Loan Forgiveness (PSLF) or the 20- to 25-year IDR forgiveness timeline. Months in deferment or forbearance generally do not count toward forgiveness. If you work for a nonprofit or government agency, switching to IDR instead of pausing payments could save you years on your path to forgiveness.

Roadblocks to Watch

Choosing between deferment and forbearance seems straightforward, but several challenges can trip you up.

Automatic forbearance traps. If you fall behind on payments, some servicers will place you in forbearance automatically to prevent default. This "helps" in the short term but racks up interest without your active consent. Check your account regularly and opt for deferment or IDR if you qualify.
Capitalization surprises. Interest capitalizes at the end of deferment or forbearance, not during it. Many borrowers do not realize their balance jumped until they see their first new statement. Ask your servicer for an estimate of your post-pause balance before you finalize your choice.
Servicer errors. The Consumer Financial Protection Bureau receives thousands of student loan complaints each year. Common issues include servicers failing to process deferment applications or misapplying payments. Get every agreement in writing and keep copies.
Credit report confusion. Both deferment and forbearance should show as "current" on your credit report, not delinquent. But servicer mistakes happen. Pull your free credit reports after your deferment or forbearance begins to confirm your loans are reported correctly.
Running out of time. Both general forbearance and most deferments have lifetime caps — usually three years. If you exhaust your forbearance allowance and then hit another rough patch later, you will have no cushion left. Use these pauses sparingly and explore IDR plans first.
Private loans play by different rules. Everything above applies to federal student loans. If you have private loans, your deferment and forbearance options depend entirely on your lender's policies. Many private lenders offer only short forbearance periods (three to six months) and charge interest the entire time. Contact your lender directly about hardship programs.

The Bottom Line

Deferment and forbearance both give you breathing room, but they are not equal. Deferment is almost always the better choice when you qualify, because subsidized loan interest gets covered by the government and you keep more money over the life of your loan. Forbearance is your fallback when deferment is not available — useful in a pinch, but expensive over time. And before you choose either one, check whether an income-driven repayment plan could drop your payments to an affordable level while still counting toward forgiveness.

The numbers are clear. On $30,000 in subsidized loans, 12 months of deferment costs you $0 in added interest. The same 12 months in forbearance costs roughly $1,959 — and more than $2,700 over the full repayment period once interest compounds. Over three years, those costs multiply. Every month you spend in the wrong program is money you will not get back.

Your best move is to call your loan servicer, confirm which deferment types you qualify for, and ask about IDR plans before you agree to forbearance. Take five minutes now to save yourself thousands later.

If you are still figuring out how to pay for college and want to see what your out-of-pocket costs will look like at different schools, build a personalized plan at CollegeLens. Getting the full picture before you borrow is the best way to keep loan repayment manageable down the road.

— Sravani at CollegeLens

Deferment vs. Forbearance: Which to Choose and Why