Simple definition
Deferment is a temporary pause on your loan payments, often granted while you are in school, unemployed, or facing hardship. Whether interest keeps building depends on the loan: on some subsidized federal loans interest may not accrue during deferment, while on unsubsidized and private loans it does. Think of it like pressing pause, where the meter sometimes keeps running and sometimes does not.
Why it matters
Deferment can stop payments during a tough stretch without hurting your credit, and on certain subsidized federal loans it may pause interest too, which is a real advantage over forbearance. But it depends heavily on your loan type. Confirm exactly how interest is handled with your loan servicer.
Real-life example
Imagine a borrower who returns to school and defers payments. If some of their loans are subsidized federal loans, interest may not accrue on those during the pause, so the balance holds steady. On their unsubsidized or private loans, interest keeps building, and the balance grows while payments are stopped.
Common mistakes
- Assuming interest never accrues during deferment, when it depends on the loan.
- Not distinguishing subsidized from unsubsidized or private loans.
- Choosing forbearance without checking whether you qualify for deferment.
- Ignoring how unpaid interest may be added to principal when payments resume.
Pro tips
- Ask your servicer whether you qualify for deferment before other pauses.
- Confirm which of your loans pause interest and which keep accruing.
- On loans still accruing interest, try to pay the interest as it builds.
- Verify current eligibility rules with your servicer, since they can change.
Related Money Dictionary terms
- ForbearanceA temporary pause or reduction of loan payments granted for hardship, during which interest usually continues to accrue.
- Interest CapitalizationWhen unpaid interest gets added to your loan principal, so future interest is charged on a larger balance.
- Student LoanMoney borrowed to pay for education, offered by the government or private lenders, repaid with interest after school.
- Federal Student LoanAn education loan issued by the U.S. government that offers fixed rates and flexible repayment and hardship options.
Frequently asked questions
Does interest accrue during deferment?
It depends on the loan. On some subsidized federal loans, interest may not accrue during deferment, so the balance holds steady. On unsubsidized federal loans and private loans, interest generally keeps building. Because the answer varies by loan type, confirm exactly how each of your loans is treated with your servicer.
Is deferment better than forbearance?
Often it can be, because deferment may pause interest on certain subsidized federal loans, while forbearance generally does not pause interest at all. That makes deferment potentially cheaper when you qualify. But eligibility rules differ, and it depends on your loan type, so ask your servicer which option you qualify for and what each costs.
How do I qualify for deferment?
Deferment is typically granted for specific situations, such as being enrolled in school, unemployed, or facing economic hardship, and you usually apply through your loan servicer. Requirements and available deferment types vary and can change over time. Contact your servicer to learn which categories you may qualify for and how to request one.
Knowing what Deferment means is knowledge — the first half. A brick gets placed when you act on it: ask your servicer whether you qualify for deferment and which of your loans would pause interest.
Also builds: Education & Training
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Plain-English education — not personalized legal, tax, or investment advice.