Life events or unexpected circumstances can sometimes put a strain on your wallet, making it difficult to make ends meet. Luckily, Direct Consolidation Loans can help during tough times. Many private loan lenders offer assistance when things get rough. First, let's explore the deferment and forbearance options available for federal student loans. Then, we'll discuss what options you have for your private student loans.
TIP: Remember, student loan debt─even from a private lender─is extremely difficult to get discharged in bankruptcy. It’s best to work with your lender or loan servicer to keep your loan in good standing (especially if you think you might want to refinance in the future). For more information on avoiding default, visit our article on how to avoid student loan default.
First, let’s get on the same page by defining the terms "deferment" and "forbearance" as they relate to the Direct Student Loan and Direct Consolidation Loan programs (i.e., federal student loans).
Student Loan Deferment
Deferment is a temporary suspension of student loan payments. You can have a subsidized or unsubsidized loan in deferment, but the government pays the interest on your subsidized loans during an authorized period of deferment. You will continue to accrue interest on unsubsidized loans, but do not have to make payments during the deferment period.
Student Loan Forbearance
Forbearance is a plan that temporarily reduces or suspends student loan payments. During forbearance, interest still accrues, even on subsidized loans. You are responsible for paying the interest on your loans while they are in forbearance.
Deferment vs Forbearance
Deferment allows you to postpone payments As long as you meet the criteria for the deferment (such as being in school on at least a half-time basis) you are entitled to this benefit. During this time, you may choose to make interest payments if you are able. If you have a subsidized loan, the government will pay your interest during any authorized deferment period.
Comparing deferment to forbearance reveals key differences. While deferment is automatic, forbearance requires lender approval. Borrowers often seek forbearance as a last resort after exhausting deferment options. During forbearance, including subsidized loans, interest accrues and adds to the principal balance if left unpaid. This results in higher overall repayment amounts post-forbearance.
These programs are offered by the federal government to help you keep your head above water during hard economic times. These programs don’t apply to private student loans, but there are some private lenders who offer assistance to help you get through difficult periods as well.
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Deferment or Forbearance on Private Student Loans
Benefits and temporary relief programs offered by private lenders vary. It’s best to check with your lender to discover options available to you if you are unable to make your payments. Most lenders offer forbearance for hardships but the policies will be different from lender to lender, including how much time you may qualify to use and under what conditions. Some lenders also offer optional unemployment protection provisions to help keep you out of default while you search for a new job.
Additionally, you may get relief in the form of a smaller monthly payment by refinancing your student loans.
When refinancing student loans, your primary financial relief will come from a reduction in interest rate, or an extension on your repayment period to lower your monthly payments─or both. When looking to consolidate or refi with a private lender, allow yourself a little time to shop around and explore the benefits offered by different financial institutions. Our Lenders page conveniently highlights the program advantages of several lenders offering private student loan refinancing.
What to do next?
Learn the basics of student loan refinancing
Try the student loan refinancing and consolidation calculator