Is Deferment or Forbearance Better for Student Loans?
Student loans are often used to help pay for college because of the low interest rates and flexible repayment terms. If you take out a student loan and then find out that you cannot afford to make your payments, the lender has some options that can help. Both a forbearance and a deferment can help in your situation, but one may be better than the other for you.
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What is a Forbearance?
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When you get a student loan, you are required to start making payments on it once you have stopped going to school for six months. In some situations, your income may not be enough to support the student loan payments. Once you find yourself in this situation, you can contact your lender and ask for a forbearance. When you get a forbearance from the lender, it allows you to temporarily stop making your payments. The interest will continue to accrue, but you can get some relief from the payments.
What Is a Deferment?
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When you cannot afford to make your monthly payment, another option that you may want to consider is a deferment on your student loans. When you get a deferment from your student loan lender, it allows you to start making your payments for a certain amount of time. In addition to getting out of making the payments, the interest on your account also stops accruing if you have a subsidized loan. On subsidized loans, the interest continues to accrue.
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Eligibility
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When you want to use a forbearance, you can do so, regardless of your economic situation. You have the option of using a forbearance for a maximum of three years. By comparison, if you elect to apply for a deferment, you have to meet the eligibility guidelines. You either have to be in school full-time or you must be going through an economic hardship. For example, if you are unemployed or disabled, you can qualify for a deferment.
Considerations
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If you have a subsidized loan, the deferment is definitely the better option for you. To get a subsidize loan, you had to display a financial need when you originally applied for the loan. If you have an unsubsidized student loan, these are essentially going to provide the same benefits. In that case, the forbearance will be just as effective because you do not have to prove anything to qualify for the postponement of your payments.
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