What’s the Difference Between Student Loan Forgiveness, Deferment, and Forbearance? 

Do One Thing: If you have questions about current federal student loans, or want to apply for one, check out the U.S. Department of Education’s online guide to learn more.

Student loans have been big news in recent years with an extra-long payment pause impacting millions of borrowers. There was talk of sweeping loan forgiveness that was then struck down by the Supreme Court. This has made it more confusing to know exactly where you stand concerning these federal loans.  

As headlines surrounding loan forgiveness continue to swirl, let’s take a look at the differences between student loan forgiveness, deferment, and forbearance.

Student Loan Forgiveness

When we talk about federal student loan forgiveness, you have a couple of traditional options, notes the Consumer Financial Protection Bureau (CFPB). In certain situations, borrowers can have a federal student loan forgiven, canceled, or discharged, meaning some or all of the loan(s) won’t have to be paid back. Below are the two most common ways to seek federal loan forgiveness.

• Public Service Loan Forgiveness (PSLF). This type of loan forgiveness allows qualifying federal student loans to be forgiven after 120 payments (typically 10 years) while working for certain public service employers such as the U.S. government – federal, state, local, tribal, or military – or certain non-profit organizations. To learn more, visit the Department of Education’s website.
• Read The Fine Print. Only federal ‘Direct Loans’ can be forgiven through PSLF. Those with other federal student loans – such as Federal Family Education Loans or Perkins Loans – may qualify for PSLF by consolidating into a new federal Direct Consolidation Loan, notes the CFPB.
• Income-Driven Repayment Forgiveness. Many federal student loans are eligible for at least one income-driven repayment plan. Such plans cap monthly payments based on income and family size. With low enough income, payments could be as low as $0 per month. Depending on the plan, the remaining balance could be forgiven after 20 or 25 years of repayment.

Where to Learn More

As you can imagine, student loan forgiveness is often complicated and can be riddled with exceptions and updates. For example, in April 2022, the Department of Education (ED) implemented several changes aimed at moving borrowers under IDR plans closer to forgiveness. Visit studentaid.gov to learn more about that move and for the latest updates on loan forgiveness programs.

Deferment

A deferment often refers to a temporary pause in a student loan payment for certain situations such as active duty military service or re-enrollment in school, notes the CFPB. Borrowers can receive a deferment on federal student loans for a certain period. Here’s a list of the reasons that qualify for a deferment.

If you have a subsidized loan, you typically don’t have to pay interest on the loan during deferment.

Be warned: Those with an unsubsidized loan are responsible for the interest during deferment. Don’t pay the interest as it accumulates and it will be added to your loan balance, which increases the amount you owe and have to pay. You must apply for a deferment with your loan servicer, and you should continue making payments until you have been notified a deferment has been granted.

Good to know: Private student loans may or may not have a deferment option. Contact your loan servicer to learn more.

Forbearance

Forbearance is a temporary postponement or reduction of federal student loan payments because of a return to school, or a financial hardship that could include a job loss or medical expenses. A forbearance allows you to temporarily stop making your monthly student loan payments or temporarily make smaller payments. To determine if you are eligible for specific types of forbearance, visit this page.

Good to know: General forbearances are available for what’s known as Direct Loans, Federal Family Education Program loans, and Perkins Loans. For those loans, a general forbearance can be granted for no more than 12 months at a time, according to the ED. If you’re still experiencing hardship when a forbearance expires, you may request another. There’s a limit on general forbearances of three years.

With reporting by Casandra Andrews