Deferment is a period during which a borrower doesn’t have to make payments on a loan, typically pausing both principal and, in some cases, interest obligations. It’s most commonly associated with student loans, but deferment applies to mortgages, certain insurance products, and even callable securities. If you’re facing financial hardship and wondering whether you can temporarily stop making payments, deferment is one of the main tools available to you.
How Deferment Works
When you’re granted a deferment, your lender agrees to let you stop making monthly payments for a set period without putting your loan into default. This is different from simply skipping payments on your own, which damages your credit and triggers late fees. Deferment is a formal arrangement with specific eligibility criteria and a defined timeline.
The length of a deferment varies. Some last a few months, others can stretch for years depending on the type of loan and the reason you qualify. During the deferment, your account stays in good standing, and you won’t face collection activity or default consequences. However, the loan balance doesn’t disappear. You still owe the money, and in most cases, interest continues building in the background.
Where Deferment Applies
Student loans are the most common context, especially federal student loans, which have built-in deferment provisions for specific life circumstances. But the concept extends further. Mortgage deferral programs allow homeowners to pause payments during financial hardships like job loss, medical emergencies, or natural disasters. In insurance, a deferred period is the waiting time before disability benefits begin paying out after someone becomes incapacitated. Callable securities also have deferment periods during which the issuer cannot call (redeem) the security after it’s been issued.
For most people searching this term, though, the practical question is about loans, and especially student loans. That’s where the rules are most detailed and where deferment has the biggest day-to-day impact.
Federal Student Loan Deferment Eligibility
Federal student loans offer deferment for several qualifying situations. These have historically included enrollment in school at least half-time, active military service, economic hardship, and unemployment. You typically need to apply through your loan servicer and provide documentation proving your eligibility.
One significant recent change: the economic hardship and unemployment deferment options are set to be phased out for new loans made on or after July 1, 2027. If your loans were made before that date, you can still use those deferment categories under the current rules. This means the window for those protections is narrowing, and borrowers with newer loans may need to rely on other options like income-driven repayment plans or forbearance instead.
What Happens to Interest During Deferment
This is the part that catches many borrowers off guard. Whether interest accrues during deferment depends on the type of loan you have.
With subsidized federal student loans, the government pays the interest that accrues while you’re in deferment. Your balance stays the same as it was when the deferment started. This is the major financial advantage of subsidized loans and one of the main reasons deferment is often preferable to other payment pause options.
With unsubsidized federal student loans, interest keeps accruing during the entire deferment period, and you’re responsible for it. When the deferment ends, that unpaid interest capitalizes, meaning it gets added to your principal balance. You then owe interest on a larger amount going forward. To illustrate: if you defer an unsubsidized loan for six months and $340 in interest accrues during that time, your principal increases by $340 once deferment ends. Every future interest calculation is now based on that higher balance.
You can avoid capitalization by paying the interest as it accrues during deferment, even though you’re not required to make payments. Even small interest-only payments during this period can save you a meaningful amount over the life of the loan.
Deferment vs. Forbearance
Deferment and forbearance both let you temporarily stop making loan payments, but they work differently. The major distinction is that deferment can be interest-free for subsidized federal loans and Perkins loans, while forbearance always accrues interest regardless of loan type.
Deferment is generally the better option if you qualify, particularly if you hold subsidized loans. It has stricter eligibility requirements, though. Forbearance is typically easier to get and serves as a backup when you don’t meet deferment criteria but still need temporary relief. Your loan servicer can grant forbearance for financial difficulties, medical expenses, or other hardships, sometimes with less documentation than deferment requires.
Neither option is designed as a long-term solution. Both are temporary pauses meant to help you get through a rough patch without defaulting. If your financial situation is likely to persist for more than a year or two, an income-driven repayment plan, which adjusts your monthly payment based on what you earn, may be a more sustainable path.
Mortgage Payment Deferrals
For homeowners, the equivalent concept is usually called forbearance rather than deferment, though the terms are sometimes used interchangeably. If you’re hit with a financial hardship like unexpected medical costs, job loss, or property damage from a natural disaster, you can contact your mortgage servicer to ask about hardship options.
The process starts with a phone call to your servicer explaining your situation. Some servicers require you to request assistance within a specified window after the qualifying event. The servicer will outline what’s available, which might include temporarily reducing or pausing your payments. Unlike federal student loans, there isn’t a standardized set of deferment categories for mortgages. Each servicer and loan program has its own policies, so the specifics vary.
What matters most is contacting your servicer before you miss payments. Reaching out proactively gives you more options and protects your credit standing in ways that falling behind on payments does not.
How to Request Deferment
For federal student loans, start by contacting your loan servicer. You’ll typically fill out a deferment request form and submit supporting documents, such as proof of enrollment, military orders, or evidence of unemployment. Your servicer reviews the application and notifies you whether you’ve been approved and for how long.
Keep making your regular payments until you receive written confirmation that your deferment has been granted. If you stop paying before the deferment is officially in place, those missed payments could be reported as delinquent. Once approved, you can choose to make interest payments during the deferment period to prevent capitalization, but you’re not required to.
For private student loans, deferment policies depend entirely on your lender. Some private lenders offer deferment programs, but eligibility rules, timeframes, and interest treatment vary widely. Check your loan agreement or call your lender directly to find out what’s available.