The Difference Between Deferment and Forbearance

Deferment and forbearance both let a borrower stop or reduce loan payments for a set period. The difference is what happens to interest and who is entitled to the pause. On federal student loans, deferment is tied to specific situations, such as school, unemployment or military service, and on subsidized loans the government covers the interest. Forbearance is easier to get, but interest is charged on every federal loan type. Elsewhere the contract decides: mortgages use forbearance, and auto lenders call it a deferral or extension.

Key takeaways

Deferment charges no interest on Direct Subsidized, subsidized consolidation and Perkins Loans. On unsubsidized and PLUS loans, unpaid deferment interest is added to principal when it ends.
Forbearance charges interest on all federal loans, but since July 1, 2023 it is not capitalized on Direct Loans and Department-held FFEL loans.
For Direct Loans made on or after July 1, 2027, Public Law 119-21 ends unemployment and economic hardship deferments and caps general forbearance at 9 months in any 24.
A mortgage forbearance does not reduce the debt; the missed amount is repaid by lump sum, repayment plan, payment deferral, partial claim or modification.
An illustrative 12-month forbearance on $30,000 at 6.53% accrues $1,959; left unpaid, it lifts the 10-year payment from $341.10 to $362.73.

Two kinds of payment pause

Under 20 U.S.C. 1087e(f) and 34 CFR 685.204, a deferment is a period in which installments of principal need not be paid, and interest either does not accrue (subsidized loans) or accrues and is capitalized or paid by the borrower (unsubsidized and PLUS loans). Capitalization means adding unpaid interest to the principal so it earns interest itself. 34 CFR 685.205 defines forbearance as stopping payments temporarily, extending the time to pay, or accepting smaller payments. The grace period after school is a separate status.

Loan type	Name of the pause	Interest during the pause	When the pause ends
Direct Subsidized, subsidized part of Direct Consolidation	Deferment or forbearance	Deferment: not charged. Forbearance: charged.	Forbearance interest is not capitalized on Direct Loans
Direct Unsubsidized, Direct PLUS	Deferment or forbearance	Charged in both	Deferment interest is capitalized if unpaid; forbearance interest is not
Federal Perkins	Deferment or forbearance	Deferment: does not accrue. Forbearance: charged.	Six interest-free months after most deferments; interest never capitalizes
FFEL held by a private lender	Deferment or forbearance	Depends on subsidy	Lender may capitalize after either
Private student loan	Usually forbearance, by contract	Typically charged	Set by the loan agreement
Mortgage	Forbearance plan	Missed payments still owed	Reinstatement, repayment plan, payment deferral or modification
Auto or personal loan	Payment deferral or extension	Keeps accruing	Skipped payments typically move to the end of the term

Federal student loans in 2026

Deferment types and who qualifies

Deferment requires meeting a condition in 34 CFR 685.204 and asking, usually with documentation. A defaulted loan is not eligible without payment arrangements the Department accepts. The main types, as of October 2026:

In-school: enrolled at least half-time, and not in a medical internship or residency (a dental residency still qualifies). Parent PLUS borrowers can defer while the student is enrolled at least half-time and for six months afterward.
Unemployment: up to three years in total, granted six months at a time, for loans disbursed before July 1, 2027. The borrower must be seeking and unable to find full-time work (30 hours a week or more), shown by eligibility for unemployment benefits or by agency registration and documented job searches.
Economic hardship: up to three years in total, one year at a time, for loans disbursed before July 1, 2027. It covers public assistance recipients, Peace Corps volunteers, and full-time workers earning no more than the greater of the federal minimum wage or 150% of the poverty guideline for their family size.
Military service: qualifying active duty or National Guard duty, plus 180 days after demobilization; enrolled reservists who are called up also get a 13-month post-active-duty deferment.
Cancer treatment: during treatment and six months after. Under 20 U.S.C. 1087e(f)(3), no interest accrues on any Direct Loan in this deferment, unsubsidized and PLUS included, for loans made on or after September 28, 2018, or in repayment then.
Others: approved graduate fellowships and rehabilitation training programs.

General, mandatory and administrative forbearance

General forbearance is discretionary, for poor health or another acceptable reason. It runs up to 12 months at a time, renewable. The General Forbearance Request form adds that the loan holder may set a cumulative limit on Direct and FFEL loans, while Perkins Loans have a fixed three-year limit.

Mandatory forbearances, as FSA's forms call them (for example the student loan debt burden request), must be granted once documented: medical or dental residencies, federal student loan payments of 20% or more of gross monthly income (up to three years), AmeriCorps, Teacher Loan Forgiveness service, Department of Defense repayment programs and certain National Guard duty. Administrative forbearance needs no paperwork, such as up to 60 days while the servicer processes a request; that interest is never capitalized.

Capitalization since July 1, 2023

The Department's final rule of November 1, 2022, effective July 1, 2023, ended capitalization on Direct Loans wherever the statute does not require it, including "after periods of forbearance." The current text of 34 CFR 685.202(b) leaves one general trigger: unpaid interest is capitalized when a deferment ends on a loan without an interest subsidy. Leaving the IBR plan is a further trigger under 34 CFR 685.209(j). An older sentence in 685.205(a) still says forborne interest is capitalized, but FSA's current forms say forbearance interest on Direct and Department-held FFEL loans "is not capitalized."

So on a Direct Unsubsidized Loan, a forbearance now capitalizes less than a deferment, though some deferment months count toward forgiveness. FFEL loans held by private lenders follow 34 CFR 682.202(b), which still lets the lender capitalize when either a deferment or a forbearance ends.

Credit and forgiveness credit

The federal servicer Edfinancial says an approved pause "should not adversely affect your credit history," but retroactive forbearances "rarely clear prior negative reporting," so arrange it before missing payments.

General forbearance: per the form, it does not count toward income-driven repayment (IDR) forgiveness or Public Service Loan Forgiveness (PSLF).
PSLF: under 34 CFR 685.219(c), months in a cancer treatment, economic hardship, military or post-active-duty deferment count during qualifying full-time employment, as do AmeriCorps, National Guard, Department of Defense and certain administrative forbearances, except while enrolled in the Repayment Assistance Plan (RAP).
RAP: under 34 CFR 685.209(k)(8), unemployment and economic hardship deferment months count toward the 360 qualifying payments; other listed pauses count only for months that ended before July 1, 2026.
IBR, PAYE and ICR: 685.209(k)(4) credits cancer, rehabilitation, unemployment, economic hardship, military and post-active-duty deferments, and, from July 1, 2024, national service, National Guard, Department of Defense, certain administrative and bankruptcy forbearances. Under (k)(6), other pauses after July 1, 2024, except in-school, can be credited with an extra payment at least equal to the IDR payment, within three years of the pause ending.

The 2025 law and July 1, 2027

Section 82002 of Public Law 119-21, signed July 4, 2025, sets two rules, loan by loan:

A borrower who receives a Direct Loan made on or after July 1, 2027, "shall not be eligible" to defer that loan for unemployment or economic hardship.
On those same loans, general forbearance under HEA section 428(c)(3)(B) "does not exceed 9 months during any 24-month period."

The Department wrote both rules into 34 CFR 685.204(f)–(g) and 685.205(c)(1)(ii) in its final regulations of May 1, 2026, using the phrase "disbursed on or after July 1, 2027." The cap covers only general forbearance. A loan disbursed earlier keeps the old deferments and 12-month general forbearance, even if the borrower takes a new loan later. Other deferments are not affected.

The law's alternative for low-income borrowers is RAP, which the new 20 U.S.C. 1087e(q) requires the Department to offer beginning on July 1, 2026. The yearly base payment is 1% to 10% of adjusted gross income by income band ($120 at $10,000 or less), divided by 12, less $50 per dependent, with a $10 monthly minimum. If an on-time payment does not cover the month's interest, the rest is not charged, and if it cuts principal by less than $50, the Department makes up the difference, up to the amount paid. For a low-income borrower, a $10 RAP payment may cost less than a forbearance in which interest keeps building.

What 12 months of pause costs

Federal student loans charge simple daily interest:

daily interest   = principal × annual rate ÷ 365
pause interest   = daily interest × days in the pause
monthly payment  = B × r ÷ (1 − (1 + r)^−n)

Here B is the balance being repaid, r the annual rate divided by 12, and n the number of monthly payments left.

Illustrative example. A borrower owes $30,000 on a Direct Unsubsidized Loan at 6.53%. That was the undergraduate rate for 2024–25 loans, per the Department's rate announcement. The loan is on the 10-year standard plan, which under 34 CFR 685.208(b)(1) stays open to borrowers with no Direct Loan received on or after July 1, 2026, and whose 10 years exclude pauses. A 12-month general forbearance at the start of repayment leaves all 120 payments. Daily interest is $30,000 × 0.0653 ÷ 365 = about $5.37, so 365 days add $1,959.00.

Path	Monthly payment after the pause	Total paid (rounded)
No pause, or a Direct Subsidized Loan in deferment (no interest charged)	$341.10	$40,932
Forbearance, interest paid as it accrues ($163.25 a month)	$341.10	$42,891, including the $1,959
Forbearance, interest left unpaid and not capitalized (current Direct Loan rule)	$362.73	$43,528
Same interest capitalized (unsubsidized deferment, private-lender FFEL forbearance, or Direct Loan forbearance before July 1, 2023)	$363.38	$43,605

The uncapitalized row assumes each payment goes first to outstanding interest and then to principal, as 34 CFR 685.211 provides. Capitalization adds only about $77 here: each $362.73 payment covers the month's $163.25 of interest and puts about $199 toward the $1,959 backlog, which is gone in about 10 months. The interest itself is the main cost, about $637 more than paying it during the forbearance, while a subsidized loan in deferment costs nothing extra. Capitalization matters more when the unpaid amount is larger and slower to clear.

Mortgages: forbearance, then what

Mortgages have no student-loan-style deferment. The CFPB describes mortgage forbearance as a temporary pause or reduction in which "you still owe the full amount," and interest on paused amounts could keep adding up. The investor's rules decide what follows. For Fannie Mae loans, Servicing Guide D2-3.2-01 (April 8, 2026) grants forbearance in steps of up to three months, 12 months in total, with no late charges during the plan. At the end, the loan must be reinstated, moved into another workout option, paid off, or referred to foreclosure.

A repayment plan spreads the arrears over future months, with total monthly payments capped at 150% of the contractual payment; a plan longer than 12 months needs Fannie Mae's written approval. A payment deferral moves 2 to 6 months of past-due principal and interest into a non-interest-bearing balance due at maturity, sale, refinance or payoff. The borrower must have resolved the hardship and be able to resume the full payment, but be unable to reinstate or afford a repayment plan. The loan must be 2 to 6 months delinquent, at least 12 months old and not within 36 months of maturity, and deferrals are capped at 12 months over the loan's life. A loan modification changes the loan's terms instead.

FHA loans use a partial claim. Under HUD's Mortgagee Letter 2025-12, the arrears become a zero-interest subordinate lien owed to HUD. It is due when the mortgage matures, the home is sold or transferred, the mortgage is assumed, or it is paid off. All partial claims together may not exceed 30% of the unpaid principal balance at default.

Illustrative example. A 30-year fixed loan originated several years ago for $250,000 at 6.75% has a principal and interest payment of $1,621.50, with taxes and insurance left out for simplicity. Six months of forbearance leave 6 × $1,621.50 = $9,729.00 of missed payments.

Way to repay the $9,729.00	What the borrower pays	Regular payment afterward
Reinstatement (lump sum)	$9,729.00 at once	$1,621.50
Repayment plan at the 150% cap	$2,432.25 a month for 12 months ($810.75 extra each month)	$1,621.50 after month 12
Fannie Mae payment deferral	Nothing now; $9,729.00 due at payoff, sale, refinance or maturity, with no interest on it	$1,621.50

Curing six months of arrears in six months would take $3,243.00 a month, or 200% of the payment, so under Fannie Mae's limit the plan needs 12 months. A plan longer than six months, or a loan more than 90 days delinquent, also requires a complete Borrower Response Package. For a borrower who can resume only the regular payment, the deferral needs the least cash.

For a principal residence, Regulation X, 12 CFR 1024.41 requires a complete loss mitigation application received more than 37 days before a foreclosure sale to be evaluated within 30 days, and generally bars a foreclosure filing until the loan is over 120 days delinquent. Small servicers are exempt from most of these procedures, but not the 120-day rule.

Auto, personal and private loans

Car lenders usually call a pause a payment extension or deferral. The CFPB's guidance on auto loans, an archived 2020 post, says it usually covers one or two payments, interest still accrues, and payments may be added at the end of the term. Some lenders limit its use or refuse borrowers already behind. Illustrative example: on a simple-interest loan with a $25,000 balance at 8%, a 61-day extension adds about $25,000 × 0.08 × 61 ÷ 365 = $334.25 of interest. Personal loans work the same way, under the contract and the lender's hardship policy.

Private student loans have no federal categories. The CFPB notes that the rules "vary among lenders," that interest may still be owed during a pause, and that terms come from the contract and applicable law. Keep paying until the lender confirms approval. The CFPB's forbearance explainer adds that private options are more limited than the federal program.

Frequently asked questions

Does the 9-month forbearance cap apply to medical residency or AmeriCorps forbearance?

No, as written. The statute limits only forbearance under HEA section 428(c)(3)(B), and 34 CFR 685.205(c)(1)(ii) applies the cap to forbearances "under paragraph (a)(1)," the general category. Residency, debt burden and national service forbearances keep their own periods.

Can a defaulted federal loan be deferred?

Not until the borrower makes payment arrangements the Department accepts, under 34 CFR 685.204(a)(3). A forbearance can help a borrower resume repayment after default if they sign a new repayment agreement or affirm the debt, for example by a payment; one based only on an oral affirmation lasts at most 120 days and cannot be repeated back to back.

What happened to borrowers in the SAVE plan forbearance?

According to Federal Student Aid, a court order ended SAVE in March 2026 (the federal servicer MOHELA dates it March 10). Servicers began sending notices on July 1, 2026, and are to reach every SAVE borrower before the end of 2026. A borrower has 90 days from the notice to choose another plan, then gets a final 30-day notice. After that, the borrower is placed in the Standard plan, or in the Tiered Standard plan if they received a loan on or after July 1, 2026 that has entered repayment.

Are late fees charged during a mortgage forbearance?

Not on Fannie Mae loans during a forbearance plan, unless the borrower breaks its terms; then late charges can accrue from that date. Late charges during a later repayment plan are waived if the borrower keeps to it. Other investors set their own terms.

Do Perkins Loans ever capitalize forbearance interest?

No. FSA's forms state that interest "never capitalizes on Perkins Loans," and Perkins general forbearance is capped at three years. Forbearance interest is charged but stays separate from principal. During most Perkins deferments no interest accrues, and under 34 CFR 674.34(k) that interest-free status lasts for six months after the deferment ends.

Before you ask for a pause

Identify each loan's type; the interest outcome depends on it.
For federal loans, check whether they were disbursed before July 1, 2027.
Check whether a deferment counts toward PSLF or your plan; general forbearance months do not count on their own.
Estimate the cost: balance × rate ÷ 365 × days paused. The Loan Calculator can show the new payment if that interest is left unpaid.
On a low income, compare the RAP payment with a forbearance; RAP's interest benefit applies only to on-time payments.
On a mortgage, ask before the forbearance ends which option follows, in writing.
Keep paying until approval is confirmed, then check your credit report.