comments
Student Loan Deferment vs. Forbearance
Email
 Print
|
If you have a student loan and recently starting taking advantage of your employer’s education reimbursement program, you’ve probably heard the words deferment and forbearance thrown around quite frequently and you probably aren’t 100% sure what the difference is (unless you were a wordsmith/geek and knew what forbearance meant). Due to a mix up with Johns Hopkins, they reported me as less than part time and my deferment became a forbearance, which resulted in about $340 of interest that accrued during that period of forbearance (which led me to research the difference). While it’s not a thousands of dollars, I’m not paying $340 when I don’t have to (no one should).
Webster Dictionary Definitions:
Forbearance – a refraining from the enforcement of something (as a debt, right, or obligation) that is due
Deferment – the act of delaying or postponing
So, how does this affect you, a student loan holder? In both cases, you will no longer be required to make your regularly scheduled student payments. With a forbearance, the interest accrual process still continues, you simply aren’t required to make any additional payments. As interest accrues, you may decide to pay that off or not, that option is left up to you. Any unpaid interest that accrues and isn’t paid off within the period of forbearance is capitalized (made part of the principal). With a deferment, your loan is frozen in time – interest doesn’t accrue and you aren’t required to make any payments.
How do you get a deferment instead of a forbearance? Usually a student loan servicer will grant a deferment if you are enrolled in classes at least part-time, defined by the institution you’re currently attending. They do not have their own universal definition of part-time, they rely on the university or college to make that determination.
A forbearance is usually granted on request and with proof of some sort of reason. Your student loan servicer will have a forbearance process and you will simply have to follow that process, which will include an application.
{ 18 comments, please add your thoughts now! }Related Posts
 By Jim |
 Stumble It! Bookmark reddit.comTags: Stafford Loans, Student Loans Nov 29, 2006 | Read more in Debt, Education, Personal Finance |
Like this article? Get all the latest articles sent to your email for free every day. Enter your email address and click "Subscribe." Your email will only be used for this daily subscription and you can unsubscribe anytime.
Star Money Articles for the Week of Nov. 27
Here are interesting posts and news this week from the MoneyBlogNetwork members and beyond: Consumerism Commentary details how you can make your kids rich. AllFinancialMatters warns us to watch out for foreclosure scams. MightyBargainHunter says that m…
I’ve been toiling at or near minimum wage ever since leaving college and for some years was in deferment or forbearance. Eventually my lender said I had run into some sort of time limit and that it was time to pay up. The lender was unwilling to accept anything less than the full scheduled payment and I defaulted. A big pile of interest and fees was capitalized, sending my principal toward the moon. Today I am paying $100 per montgh but the loans are still in default and I’m paying a high interest rate I cannoty reduce and principal reduction is tediously slow. I will probably be broke for the rest of my life. Don’t let this happen to you.
There might be an option for you to develop a financial plan and not be broke for the rest of your life. Maybe declaring a bankruptcy, or some other way. You should seek help of a certified financial planner (cfp). You can get a free initial consultation, and see if they could offer something interesting to you and actually help. You can find a cfp in your area through napfa.org
Good luck, I hope you won’t be broke for the rest of your life.
My advise to all – if you have to get student loans college isn’t worth it – especially in this economy. Don’t do it! I have an MBA and am in debt from my student loans in the amount of $86K and no way to pay it back – I only have a year and a half left of my forebearance … after that they can drastically affect my credit negatively and call me with threatening messages – anything and more a normal creditor will do. I can pay what I can but it won’t be enough – they say with an MBA you will average 6 figures annually – this is a lie!!!!!! It isn’t worth it – don’t make the same mistake I made.
I have an MBA and yes I owe plenty in student loans after 2 degrees, I say I pay out about $700/month, however I made $60-70K my first year out of the MBA w/ the same job I had during the MBA, just worked more hours is all. I say now I make enough to pay, and since I have now been paying my loans about a year now, my credit score went up about 70 points already. I am pregnant also with my first, and I called today to see how it works if I do need to stop payments for a while, and its a forebearance, and they have other deferment options. I do not worry about them harrassing me for payment, and if it comes to where it gets that bad, I figure it will be another deferment I can somehow get. There are also several different repayment plans. I know one of my lenders just wants proof of the other loans and then they could spread the balance out over 20-30 years if you need. That means you pay more in the long run, but until things pick up, that could be an option for you; just ask.
You can’t declare bankruptcy for student loans, the only way to get rid of them is to pay them off or die…sorry!
I accrued loans to get my Masters but my husband’s health keeps me from making enough to pay my student loans. I’ve deferred and now I have forebearance. Is there a way to pay minimal amounts to avoid default?
Dee,
Have you tired the student loan forum at creditboards? You will get more specific answers there probably.
saladdin
link
I can not read anything under the head-Free Money Finance-it is all distorted! What is it?
Interest accrues on the unsubsidized portion of the loan in a deferment status, its not “frozen in time.”
Right, I think the difference is only important for subsidized or maybe a few other loans. It doesn’t make a difference for the unsub, plus, etc.
I just applied for a Deferment and all they did was lower my payment 29 dollars. I am unemployed and have been and wanted to not pay and freeze it for a while until I got a job. What is the point of applying for a Deferment if they are not going to do it?
To everyone who has Stafford and/or Perkins Loans…you are eligible to consolidate ur loans with the Dept of Ed..even if u’ve consolidated already. 1.800.557.7392 is their #..Lowered my payment from $270 a month to $83 a month. Federal money cannot be discharged in bankruptcy and has no statute of limitations so if you have Federal Loans give the Dept of Ed a call and see if an income contingent repayment lowers your monthly bill…All I can say is that it did for me.
i actually called and my loans were in default for years and since i am currently displaced due to the economy i was granted a consolidation of my loans and i went from being garnished $700+ per month to settling for $320 a month and finally $45 a month after the consolidation. definitely give them a call because it is worth it
I am a debt collector of defaulted student loans. My best advice is to consolidate your loans with direct loans and get into the william d. ford income contingent repayment plan. It works for several of my borrowers and they don’t have high payments. Also the loan will be forgiven after 25 years of payments.
WOW 25 years! That is a very long time! I want to repay soon…I know it’s going to take me a min. but I am turning in my paperwork for a deferment now…Its in place for a year which is just enough time to finish the tuition remb. plan at my new job! I’m crossing my fingers and hoping it all falls into place right and it pays for some! I’ll take all and any help I can get!
The military is going to start paying back my student loans. Should I consolidate all my loans before they begin making payments?? Please help!!
Does it matter what kind of school one is going to, to qualify for deferment. I am currently attending a private nursing school as a full-student and I am wondering if I qualify for deferment.