loan defermentIn the simplest of terms, loan deferment is a temporary pause in mandatory loan payments. There are several reasons for loan deferment, including military service, re-enrollment in college or trade school, or for extenuating circumstances.

A forbearance is a different kind of deferment.

The Basics of Loan Deferment

First of all, you need to be approved for deferment. You will get official notification of how long the period lasts before payments resume.

Not making your payments is not the same thing! This is a temporary postponement of repayment, not debt forgiveness.

Not all lenders offer deferment options. Federal student loans have a set of rules and conditions, but private lenders have no legal requirement to offer these things. It may or may not be an option for you, depending on who owns your debt.

Private lenders, banks, and credit unions offer loan deferment options very infrequently. Outside of federal student loans, there are not many deferment programs available.

Here is a complete listing of qualifying reasons from the Department of Education.

Deferment vs. Forbearance

Just because you get a break from repaying your loan doesn’t mean the clock stops running!

There is one key difference to understand between loan deferment and forbearance:

For deferment, you are not responsible to pay for the interest that accrues on your subsidized consolidation and Stafford loans.

A forbearance is different in several ways, but mostly in that you are still responsible for every last bit of interest even if you aren’t making payments.

And when the forbearance is over, all the extra interest will be added onto the principle. This will in turn generate additional interest and make your initial loan much bigger.

With a deferment, you either qualify or not based on the established criteria.

A forbearance is entirely up the discretion of the lender, and they are under no obligation to grant it.

Of course, aside from student loans deferment and forbearance are mostly unheard of!

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