Deferment vs forbearance: What's the better way to postpone student loan debt payments?

When you graduated you promised to pay your loans. And you meant to.

But then you went to grad school. Or your rent got out of control, and your new job pays way less than expected. Or you lost your job. 

No matter the reason, it is important to recognize when you're in trouble — you do not want to become one of the more than 40% of Americans who have gotten three months or more behind on student loan repayments.

Even falling late by less time might slide you into a danger zone: Delinquency and default can seriously hurt your credit.

If this sounds like you, remember that you might be able to take advantage of programs that will keep you from drowning: loan deferment and forbearance.

Most people recognize these two phrases as something having to do with student loans.

But what do they mean? What is the difference? And which is better?

Here are the answers.

What is student loan deferment?

A deferment on your student loan means that repayment of both the principal and the interest accumulating is temporarily delayed for up to three years.

Only certain people are eligible: More on that below.

For three types of federal loans, the government will pay your interest during the deferment, so it won't keep growing out of control. These are Direct Subsidized Loans, Subsidized Federal Stafford Loans and Federal Perkins Loans.

But for unsubsidized loans, the interest will continue to accrue.

You won't have to pay it while your loan is in deferment, but be well aware that it is being added to the total amount you will need to pay later.

What is student loan forbearance?

A forbearance on your student loan is for people who aren't able to make their regular student loan payments, but don't qualify for a deferment.

A forbearance is a break, for up to 12 months, from having to make payments. 

But during a forbearance, interest continues to accrue on your principal debt on both types of loans: subsidized and unsubsidized.

You can pay the interest while in forbearance or not, but you will be expected to pay the total amount when you resume payments.

The upside is that you get a temporary break to get your ducks in a row — and your credit score stays intact in the meantime.

Who is eligible for student loan deferment?

Deferment is available under many different circumstances: Qualifying reasons you can request deferment include active duty military service, certain graduate fellowships, certain rehab programs for people with disabilities, and unemployment or economic hardship.

For service members, if you are in college at least half time when you are called to active duty and plan to return to school upon your return, you are eligible for a deferment of up to 13 months after your qualifying service.

Remember: No one is going to ask you if you need a deferment.

You need to submit a request to your loan servicer — the company to which you send your payments. Also, if you're in school at least half time and are looking for a deferment, you'll need the OK of your financial aid office, too.

Who is eligible for forbearance?

There are two types of forbearance — discretionary and mandatory — and the eligibility requirements differ.

To receive a discretionary forbearance you need to apply for the break and your lender makes the decision whether or not to grant it you. 

The reasons that could make you eligible for a discretionary forbearance are financial hardship or illness.

A mandatory forbearance of your loan means that if you meet the eligibility requirements, your lender must grant it to you. 

Those requirements are: if you're serving in a medical or dental internship or residency program; if the total amount of student loan payments each month is 20% or more of your total monthly gross income; if you're serving in a national program of service for which you've won an award; if you are included in the U.S. Department of Defense Student Loan Repayment Program; or if you're a National Guard member and have been called to duty by a governor, but you are not eligible for a military deferment.

As with deferments, no one is going to come around saying, "You sure look like you could use a forbearance."

You will need to ask your loan servicer for a forbearance and provide documentation showing your need.

Here's how to decide whether to ask for a deferment or forbearance

If you want to take action to avoid delinquency and default, deferment and forbearance are great tools. But they offer different benefits and are used in different situations. 

If you are falling behind, you always want to see if you are eligible for a deferment first. This is because, at least with subsidized loans, the interest does not accrue while your loan is deferred.

Even if you have an unsubsidized loan, a deferment is still preferable because in certain circumstances the deferment period can be up to 3 years — while the standard forbearance period is 12 months.

It's true that you can get up to 3 years of forbearance, but you will need to re-apply for each 12-month period to extend it.

Federal loans allow you to get only 3 years of forbearance total.

Private lenders also offer forbearance, but the terms — who is eligible and how many times you may ask for and receive forbearance — are up to the lender.

Plus, all private loans in forbearance accrue interest.

Because forbearance and deferment on unsubsidized loans will cost you more in the long run — due to accrued interest — be sure you have a plan to pay it all off when the time runs out.