Forbearance vs. Deferment: Understanding the Differences

When financial hardship strikes, many borrowers seek breathing room, but not every relief option works the same way. Both forbearance and deferment allow you to pause or reduce payments temporarily, but they differ in the duration of the relief and what happens once payments resume. 

Since March 2020, mortgage servicers have provided forbearance to approximately 8.3 million U.S. borrowers, illustrating the widespread adoption of these programs during economic disruptions. For individuals facing mounting debt, choosing the right option can determine whether recovery is manageable or overwhelming. 

This blog breaks down the key differences between forbearance and deferment, how each affects your payments and credit, and which one may fit your financial situation best. Let’s jump in. 

Key Takeaways

• Both offer temporary payment relief, but forbearance typically reduces or pauses payments while interest continues to accrue, whereas deferment can fully pause payments and sometimes halt interest.

• Eligibility varies by loan type. Deferment often requires a qualifying event, such as unemployment or school enrollment, while forbearance is granted at the lender’s discretion due to financial hardship.

• Interest accumulation is the key cost. Most forbearance programs continue charging interest, which can increase your overall debt once payments resume.

• Each option has different repayment outcomes. Deferment extends your loan term by adding skipped payments to the end; forbearance may require you to catch up sooner or with larger installments.
  

What Is Forbearance and Deferment?

Both forbearance and deferment are temporary relief options that allow borrowers to pause or reduce loan payments when financial challenges arise, but they work differently.

Deferment is a pause in payments granted under specific qualifying situations, such as financial hardship, unemployment, or military service. During this period, interest may or may not continue to accrue, depending on the type of loan. You may qualify for loan deferment if you are:

• Undergoing active cancer treatment or recovery.

• Experiencing financial hardship or receiving public assistance.

• Enrolled at least half-time in an eligible school or graduate fellowship.

• Serving in the military or returning from active duty.

• A Parent PLUS borrower with a dependent enrolled in school.

• Participating in a rehabilitation or career training program.

• Unemployed and seeking work.
  

Forbearance offers short-term flexibility when you can’t meet regular payments. It allows for reduced or paused payments, sometimes with a temporary rate adjustment; however, interest typically continues to accumulate. You may qualify for loan forbearance if you are:

• Facing income loss, medical bills, or unexpected financial hardship.

• Serving in AmeriCorps or the National Guard.

• Completing a medical or dental internship or residency.

• Performing qualifying service for the Department of Defense loan forgiveness.

• A teacher working toward Teacher Loan Forgiveness eligibility.

• Managing student loan payments that exceed your current income capacity.
  

Approval depends on the lender’s discretion and your hardship, such as job loss, medical emergencies, or unexpected expenses. 

Now that we’ve covered what these relief options mean, let’s look at how they work in practice.

How Deferment and Forbearance Work

Both deferment and forbearance come with long-term costs that borrowers often overlook. In most cases, interest continues to accrue while your payments are suspended. 

This means your loan balance grows, and you’ll end up paying more over time. If you’re working toward loan forgiveness, months spent in deferment or forbearance typically don’t count toward forgiveness requirements, slowing your overall progress.

Here’s how interest accumulation plays out in real numbers:

Example: During Deferment

• Loan balance: $30,000 at 6% interest

• Deferred for 12 months → $1,800 interest accrues

• If unpaid, the interest is capitalized (added to the principal), increasing your total loan balance.
  

On a fixed repayment plan, your monthly payment could increase by about $20, and your total repayment amount by around $620.

Example: During Forbearance

• Loan balance: $30,000 at 6% interest

• In forbearance for 12 months → $1,800 interest accrues

• Unpaid interest adds to previous non-capitalized interest, increasing your balance and future payments.
  

Monthly payments could rise by around $18, and total repayment by roughly $613 once regular payments resume.

Both options offer breathing room when you need it most, but they also increase long-term borrowing costs. 

Understanding how each one operates sets the stage for comparing their key differences in multiple aspects.

What Is the Difference Between Deferment and Forbearance?

Both deferment and forbearance provide short-term payment relief, but they differ in their operation, duration, and interest handling. Here’s a table breaking down the key differences: 

Aspect	Deferment	Forbearance
Length	Duration varies by deferment type; some last up to three years or as long as you remain eligible.	Generally approved for up to 12 months at a time, sometimes extendable to a cumulative limit.
Qualification Requirements	Requires proof of a qualifying event such as unemployment, military duty, cancer treatment, or economic hardship.	Typically based on temporary financial hardship; mandatory for certain cases like AmeriCorps, medical residency, or National Guard service.
Interest Accrual (Student Loans)	Interest doesn’t accrue on subsidized federal loans such as Direct Subsidized, Stafford, or Perkins Loans.	Interest accrues on all federal loan types and may be capitalized if unpaid after the relief period.
Interest Accrual (Mortgage Loans)	Regular interest on the monthly payment still applies, but no additional interest is accrued during deferment.	Interest continues on paused payments, but no additional interest is charged beyond what was originally due.
Availability	If you qualify and have deferment time remaining, your servicer must approve it.	Usually at the servicer’s discretion, except in specific mandatory hardship programs.
Duration of Relief	Can extend for years in some deferment types if eligibility continues.	Limited to short-term periods, typically renewed in 12-month intervals.
Repayment After Relief	Deferred payments are added to the end of the loan term, avoiding a lump-sum burden.	Missed payments may require repayment once forbearance ends, which may be made as a lump sum or through adjusted installments.
Long-Term Impact on Loan Balance	May prevent added interest on certain subsidized loans, limiting long-term debt growth.	Accrued interest often increases total debt, especially if capitalized after relief.
Credit Impact	Does not hurt your credit score, but it may appear on your report as a note of deferment.	Does not directly affect your credit score, but it will be recorded as a forbearance on your report.

Choosing between deferment and forbearance ultimately depends on your financial timeline and eligibility. 

Also Read: How to Negotiate a Debt Settlement with Collectors?

Once you understand how they differ, the next step is to learn how to apply for the option that best suits your current situation.

How to Apply for Forbearance or Deferment

Applying for forbearance or deferment is straightforward once you understand your loan type and the required documentation. 

• Online: Most lenders and servicers allow you to apply directly through their websites. Log in to your account, select the hardship or relief section, and follow the prompts to submit your request.

• Mail or Email: If you prefer a written process, download the appropriate forbearance or deferment form, complete it, attach required documents, such as proof of income loss or medical bills, and send it to your loan servicer.

• Phone: If you’re unsure which option suits you best, call your loan servicer for assistance. A representative can explain available programs, required paperwork, and approval timelines.
  

The goal is to show clear financial hardship and request relief through the proper channel.

If tackling creditor communication feels overwhelming, Shepherd Outsourcing specializes in negotiating with creditors and creating tailored debt management plans, guiding you through the process of financial recovery. Get started today!

If neither program provides the relief you need, there are other ways to manage debt and keep your finances on track.

Alternatives to Deferment and Forbearance

Forbearance and deferment can help in a financial pinch, but they’re not the only ways to manage debt. Depending on your situation, you may benefit from more sustainable options that prioritize long-term stability over short-term relief.

1. Adjusted or Income-Based Repayment Plans

If your income has changed, consider asking your lender for an adjusted repayment plan. Many creditors offer programs that link your monthly payments to your current income, helping you stay consistent without falling behind on payments.

2. Refinancing or Loan Restructuring

If you have multiple loans or high interest rates, refinancing may help. Working with a new lender or restructuring through your existing one can lower your monthly payments or extend your repayment timeline.

3. Realistic Budgeting

A clear budget can make more of a difference than most people expect. Review your spending, reduce nonessential expenses, and reallocate those savings toward repaying debt more steadily.

4. Increasing Your Income

If expenses are already minimal, a short-term income boost can bridge the gap. Taking on freelance work, part-time projects, or weekend gigs can make regular payments easier to manage.

5. Professional Debt Management Support

If managing multiple debts feels overwhelming, Shepherd Outsourcing can provide assistance. Our team works directly with creditors to reduce what you owe, consolidate payments, and build a repayment plan that’s realistic, compliant, and designed to help you regain financial control.

Choosing the right alternative depends on your goals, whether you need immediate financial relief or a path to long-term recovery.

Also Read: Solutions to Common Financial Challenges

When financial decisions become complex, expert guidance from  Shepherd Outsourcing can make all the difference in choosing the right path toward long-term financial recovery.

Get Expert Guidance Beyond Forbearance and Deferment

If temporary relief isn’t enough, Shepherd Outsourcing helps you move from short-term solutions to long-term financial recovery. Here’s how we can help:

• Negotiate directly with creditors to reduce your total outstanding debt and ease repayment pressure.

• Design tailored debt management plans that fit your income, helping you repay steadily without disrupting essentials.

• Consolidate multiple debts into one simple plan so you can focus on recovery instead of juggling payments.

• Offer professional financial counseling to help you understand your options and choose the best path forward.

• Ensure full legal compliance across every step, keeping your relief process transparent and risk-free.
  

When deferment or forbearance ends, Shepherd Outsourcing helps you build the structure and confidence to stay on track for the long term.

Conclusion

Forbearance and deferment can both offer temporary breathing space during financial hardship, but they’re not one-size-fits-all solutions. Each comes with different terms, timelines, and long-term effects on your repayment plan. 

The right choice depends on how quickly you expect your finances to recover and whether you can manage the payments once the relief period ends. Before applying, take the time to understand the costs, eligibility criteria, and impact on your overall debt.

Shepherd Outsourcing helps you handle debt management with clarity, negotiating with creditors, organizing repayment plans, and guiding you toward real, lasting financial relief. Get started today!

FAQs

1. What is the main difference between forbearance and deferment?

Forbearance typically reduces or pauses payments, allowing interest to continue accruing. Deferment, on the other hand, often pauses payments completely and may temporarily stop interest on certain loan types.

2. Does forbearance or deferment affect my credit score?

Neither should harm your credit if approved and managed correctly. However, missed payments outside the agreement or rising balances can indirectly affect your score.

3. How long can forbearance or deferment last?

Forbearance typically lasts a few months to a year, depending on your lender. Deferment can be extended for qualifying situations, such as education or military service.

4. Can I apply for forbearance or deferment more than once?

Yes, but each lender sets limits. Multiple requests often require proof of continued hardship and may affect future eligibility for relief programs.

5. How can Shepherd Outsourcing help during forbearance or deferment?

Shepherd Outsourcing assists in negotiating with creditors and creating structured repayment plans to maintain financial stability during and after relief.