what function do both deferment and forbearance each serve?
What functions do both deferment and forbearance serve?
Answer:
Deferment and forbearance are two options available to borrowers to temporarily postpone or lower their student loan payments. While they both serve similar purposes in providing relief for borrowers, they have differences in how they are applied and the conditions under which they can be used.
Deferment: Deferment is a period during which repayment of the principal and interest of the loan is temporarily delayed. It is often used during specific circumstances such as unemployment, economic hardship, or returning to school at least half-time. One key feature of deferment is that for subsidized federal loans, the government pays the interest that accrues during the deferment period.
Forbearance: Forbearance allows borrowers to temporarily pause or reduce their loan payments for a specific period due to financial hardships, medical expenses, or other reasons acceptable to the loan servicer. Unlike deferment, interest continues to accrue on all types of loans, including subsidized federal loans.
In summary, deferment and forbearance are important options for borrowers facing financial difficulties, providing a temporary break from making regular student loan payments. However, it is crucial to understand the implications of each option, especially regarding the accrual of interest during the period of non-payment. Borrowers should contact their loan servicer to discuss the best option based on their individual circumstances.