Having financial hardship. Student Loan..should i apply for a Forbearance or Deferment?
It is in your best interest to keep your loan in a payment status as to not extend the life of the loan and therefore increase the amount of interest you repay back. If you can afford smaller payments, call your student loan servicer to find out if you can change your repayment plan and if you can, if there is a repayment plan that you can currently afford.
If you cannot afford a smaller payment and need to stop payment on your loans for a period of time, a deferment is more beneficial to you, than a forbearance. However, a deferment is usually harder to get as you have to meet specific eligibility requirements. Again, call your student loan company. They are trained to go over your options with you and advise you of what you qualify for.
During a period of deferment, interest only accrues on the UNSUBSIDIZED portion of your balance. You will see no interest accruing on the SUBSIDIZED portion (technically the government pays that interest for you – but that is behind the scenes – hence why there strict eligibility guidelines). Also deferments have a limitation. Most are 36 months(cumlative) for the life of your loan.
During a period of forbearance, interest accrues on the entire balance. You will get quarterly or bi-annual interest statements. While paying the interest during your forbearance (or deferment) is optional, any unpad interest will capitalize (add on) to your balance when the deferment/forbearance ends. This creates the mess of interest on top of interest accruing.
Some student loan companies have a cumlative cap on forbearance time too, while some do not. Currently, Direct Loan Servicing Center does not have a cap on how many monthsyour loan can be in a forbearance. You will have to reaply as they can only be approved for 12 month periods.
I hope this helped!
