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Student Loan Deferment vs. Forbearance

Posted By Jim On 11/29/2006 @ 10:51 am In Debt,Education,Personal Finance | 38 Comments

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.


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