Student Loan Deferment vs. Forbearance

What Is the Difference Between Student Loan Deferment and Forbearance?

Recent data from the Education Data Initiative shows that in a single year, over a quarter of undergraduate students take on federal loans. The amount of debt you will have to pay off after graduation can be intimidating, but there are options to give you some breathing room and relief. Two of the most common routes are student loan deferment and forbearance.

Both deferment and forbearance give you the option to pause or reduce your payments on federal student loans. The difference lies in how the interest accumulates during that period of relief. At OVC Scholarship Network, we offer resources for students looking to minimize debt in college, including a verified scholarship directory that is updated year-round.

What Does It Mean When a Student Loan Is Deferred?

A deferred student loan is a loan with its payments temporarily put on hold for a qualifying reason, such as returning to school or losing a job. During deferment, you are not required to make monthly payments, and skipping them will not push your loan into delinquency or default. Once the deferment period ends, your regular payment schedule picks back up.

Many students go through deferment without filling out a single form. If you are enrolled in school at least half-time, your federal loans are usually placed into in-school deferment automatically. Other common types of deferment include:

• Unemployment deferment for borrowers who are actively looking for full-time work
• Economic hardship deferment for borrowers who receive certain public benefits, have very low income, or serve in the Peace Corps
• Military service deferment for borrowers on active duty during a war, military operation, or national emergency
• Cancer treatment deferment for borrowers receiving treatment and for six months afterward
• Graduate fellowship deferment for borrowers in an approved fellowship program

Unemployment and economic hardship deferments can each last up to three years in total. These two options are going away for newer borrowers, though. Under a federal law passed in 2025, loans given out on or after July 1, 2027, will no longer qualify for unemployment or economic hardship deferment. If you already have federal loans from before that date, you should keep access to the current deferment rules.

What Is Forbearance for a Student Loan?

Student loan forbearance is another way to pause or lower your federal loan payments for a short time. It is usually meant for a temporary money problem that does not fit any of the deferment categories. There are two main types of forbearance.

General forbearance is up to your loan servicer, which is the company that handles your loan payments. You can ask for it if you are struggling to pay your bills, dealing with medical costs, or changing jobs. Right now, general forbearance can last up to a year at a time, with a total limit of three years. That limit is getting shorter for newer loans. If your federal loan is issued on or after July 1, 2027, general forbearance will max out at nine months in any two-year stretch.

Mandatory forbearance is different. If you qualify, your servicer has to say yes. You may qualify if you are in a medical or dental residency, serving in AmeriCorps, called up by the National Guard, or paying 20 percent or more of your monthly income (before taxes) toward student loans.

The big downside to forbearance is interest. Interest keeps adding up on every type of federal loan while your payments are paused, even subsidized loans. That makes forbearance a better short-term fix than a long-term plan.

How Does Interest Accumulate on Federal Student Loans?

Interest on most federal student loans adds up every day based on how much you owe and your interest rate. Who pays that interest depends on your loan type. With subsidized loans, the government covers the interest while you are in school at least half-time, during your six-month grace period, and during deferment. With unsubsidized loans, you are responsible for all the interest from day one.

Any unpaid interest can be added to your loan balance, which means you end up paying interest on a bigger amount. Paying even a little toward your interest while in school can help keep your balance in check.

Funding Solutions From OVC Scholarship Network

The easiest student loan to manage is the one you never have to take out. Scholarships offer money for college that you do not have to pay back, and every dollar you win is a dollar you will not be paying interest on later.

Even a few smaller awards can add up and reduce the amount you need to borrow each semester. For more guides and resources, visit OVC Scholarship Network or contact us online for any further questions.