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What is the difference between a deferment and forbearance?

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  1. deferment delays payment of a loan or money based on certain criteria you agree on at the time of the loan.  for example you may defer your college loans, and start paying them 6 months after you graduate based on the criteria being listed in your contract, or you can defer them 10 years to go to graduate school based on criteria from the lenders.  

    forbearance allows you to temporarily suspend a continued agreed upon payment which you currently make, such as your mortgage or student loans, but requires you to make up the missed payments using current assets (such as your car)  in your possession to settle the deliquency.


  2. A deferment is an entitlement, meaning it must be granted if you qualify.  Most forbearance is granted at a lender’s discretion.  During deferment, the federal government pays interest that accrues on a subsidized loan.  The borrower is responsible for interest that accrues during a deferment on an unsubsidized loan as well as during forbearance.

    Additionally, the interest that accrues becomes “capitalized.” Capitalization is when accrued interest and the principal balance are added together. Then interest accrues on that new total.

    Remember, you must request a deferment or forbearance in order for it to be granted.  The lender or servicer does not automatically grant deferments or forbearance.

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