Deferment and forbearance are just fancy ways of saying postponing your student loan repayments. Let's take a look at the difference.
Deferment is postponing your student loan repayment for a specific period of time for a specific reason. You have to apply for deferment through your lender; it is not automatic. You apply for a deferment by contacting your lender and filling out a form. Not everyone will qualify for a deferment. You will need to illustrate your need in order to receive a deferment. Remember to continue making payments on your loans until you are 100% sure you have been granted a deferment; you do not want to default on your loans! There are multiple reasons you may opt to apply for loan deferment including:
- graduate school/fellowship
- you will now be attending school less than half time
- economic hardship
- unexpected family/personal hardship
- unexpected expenses
If you are not eligible for a deferment, forbearance is another means of postponing your loan repayments. There are four different reasons why you may be granted a forbearance:
- Discretionary- It will be up to you and your lender to come to an agreement which can be for any reason as long as your lender agrees to your forbearance request. For example, if you are returning to school less than half time and are not eligible to receive a deferment.
- Administrative- A lender can grant you postponement on your loans without your written authorization. This may occur if you were behind on your loan payments at the time you filled out a form for deferment.
- Mandatory- A mandatory forbearance can be granted for up to 12 months. If you are not making enough money to cover the cost of your loans. Your lender must accept your request for a specific time length.
- Mandatory Administrative- This type of forbearance can be granted for no more than three years. If you have a specific reason, your lender must grant this request. For example, if you are not able to repay by using an income based repayment program within a ten year time frame because of the varying interest rates.