Both deferment and forbearance serve the function of providing temporary relief from making loan payments for borrowers who are experiencing financial difficulties. They allow borrowers to pause or reduce payments temporarily to avoid defaulting on their loans, which helps manage short-term financial challenges without severe negative consequences like credit damage or foreclosure.
Specific Functions of Deferment and Forbearance
- Deferment typically pauses loan payments for qualified borrowers under specific circumstances such as enrollment in school, economic hardship, or military service. During deferment, interest may not accrue on certain subsidized loans, meaning the borrower does not owe interest for the period of deferment.
- Forbearance is generally easier to obtain and more flexible, allowing borrowers to temporarily pause or reduce payments for a variety of reasons, including financial hardship or medical expenses. However, interest continues to accrue during forbearance on all types of loans, which can increase the total amount owed.
In summary, both deferment and forbearance function to provide temporary payment relief to borrowers, helping them cope with financial strain and avoid default, but they differ mainly in eligibility criteria and how interest accrues during the relief period.
