Applying for a deferment or forbearance to postpone your student loan payments is temptingly easy—sometimes, all you have to do is ask over the phone for a forbearance. No paperwork needed!
If you are unable to make even small payments due to unemployment, serious illness, or a major financial crisis, you can use these options to protect your credit, avoid serious fees, and keep collectors at bay. That potential relief is difficult to ignore.
But, like with most "easy options" there is a catch—or three:
- Deferment and forbearance are limited. Each postponement is good for only a set amount of time. Once you run out—you're out. You'll likely pay back your loans for a while, and while it's good to hope for the best, difficult times can happen. Having these options when you really need them could be a huge relief.
- Interest could make your future payments larger. During forbearance (and sometimes in deferment), interest still builds up on your loans that you're responsible for. If this interest isn't paid during your postponement, it will be added to your principal balance (capitalized) and you'll pay interest on top of interest—increasing the amount you repay overall.
- You may need to pay to use these options. With federal loans, deferments are your right—if you qualify, you can't be denied this option. Private student loans work differently. These lenders may choose whether to offer postponements. If they do, they may charge you to use these options.
When Should You Use Deferment Or Forbearance?
Because of the potential drawbacks, you want to use these postponements only in emergencies. But how can you know what's a true "financial crisis"?
Here's a quick list of do's and don'ts to help you decide.
DON'T Use Deferment Or Forbearance If …
- You haven't looked at other repayment options yet—many offer better long-term solutions.
- You qualify for affordable payments under another repayment plan (some eligible payments can be as low as $0 per month).
- Your salary isn't what you expected upon graduation. If you can afford to make payments now, do so.
DO Use Deferment Or Forbearance If …
- You're in danger of missing payments because you can't afford them right now.
- You are unemployed or facing serious financial hardship.
- You are in the midst of a serious financial emergency and need more time to make your payments.
- You are waiting for your application for total and permanent disability discharge to process.
If You Decide To Postpone Your Loans
Deferments tend to offer greater relief than forbearance because, in some cases, interest does not accrue during them. So, before jumping on that forbearance your student loan servicer offers, ask them about deferment instead.
Most federal loans offer deferments, while private student loans typically come with fewer postponements. Either way, get the full scoop before signing up. Find out if this option comes with a fee, if interest continues to accrue during the postponement, how long the deferment/forbearance lasts, and how many times you can use this option.
One last thing: If you have federal and private student loans, you will need to apply for separate postponements for each. You can download applications for federal student loans right here on Salt®.
Other Options To Help With Your Payments
If you're making large payments under the standard repayment plan, your student loans may feel like a financial crisis—even if you're employed full time.
Fortunately, changing your repayment plan can help make your payments manageable while still allowing you to make a dent in your student loans. You may even qualify for payments as low as $0 per month under some plans, like income-based repayment, Pay As You Earn and income-contingent repayment. They offer an even better reward, too: forgiving your loan balance once you meet specific requirements.
Ultimately, all of these options are here to help you—it's up to you to decide which ones to use and when. Making smart choices can save you money and stress. So, do your research, and don't be afraid to ask for help.