Life can bring unexpected challenges that make it tough to stay on top of your financial obligations. If you’re facing difficulties, Direct Consolidation Loans might provide some relief. Many private loan lenders also have options to support borrowers during hard times. We’ll start by reviewing the deferment and forbearance programs available for federal student loans, followed by strategies to handle 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 delay payments if you meet certain criteria, like being enrolled in school at least half-time. You may opt to make interest payments during this period. For subsidized loans, the government covers your interest during deferment.
In comparison, forbearance requires lender approval and accrues interest, increasing the total repayment amount post-forbearance. While these federal programs aid during financial hardship, they do not apply to private student loans. Some private lenders may offer assistance in challenging times too.
For example, A student whose considering pursuing further education, can use deferment to delay payments until graduation. In contrast, someone facing financial hardship might opt for forbearance with accrued interest adding to their repayment amount. Either choice will be dependent on your individual circumstances, but it's important to understand the difference.
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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
