The short answer

Deferment and forbearance both pause or reduce required loan payments, but they are not identical: deferment may not accrue interest on certain federal loan types, while forbearance generally accrues interest regardless of loan type. Unpaid interest later added to your principal is called capitalization, and it means future interest is calculated on a larger balance. Confirm which option applies to your loan at studentaid.gov.

The general difference between the two

Both deferment and forbearance let you pause or reduce payments for a period, usually because of hardship, school enrollment or another qualifying situation. The meaningful difference is interest: certain federal loan types may not accrue interest during deferment, while forbearance is generally treated as interest-accruing no matter the loan type. Eligibility rules and which option fits which situation change over time, so studentaid.gov is the place to confirm current terms for your loans.

What happens to interest that accrues during the pause

If interest accrues while you are not required to pay it, it does not disappear. It typically remains unpaid until a point when it is added to your principal balance, an event called capitalization. Once that happens, future interest is calculated on the new, larger balance, so the total cost of the loan increases.

  1. Confirm with your servicer or at studentaid.gov whether your specific pause option accrues interest.
  2. Ask when any accrued interest would capitalize, since this can happen at different points depending on the loan.
  3. If you can afford it, consider paying at least the accruing interest during the pause to avoid capitalization.
  4. Recheck your balance after the pause ends to confirm what capitalized, if anything.

Why paying interest during a pause can be worth it

Even a small payment that covers the interest accruing each month keeps your principal balance from growing during a deferment or forbearance period. This does not remove the hardship the pause was meant to address, but it limits how much more expensive the loan becomes once regular payments resume.

What to do before the pause actually ends

Contact your servicer shortly before the deferment or forbearance period ends to confirm your new balance, whether any interest capitalized, and what your payment will be going forward. Finding this out on the day payments resume leaves no room to adjust your budget in advance, while asking a few weeks ahead gives you time to plan around the new number.

Worked example · illustrative numbers

Example: interest accruing over a six-month forbearance

This is a hypothetical loan with a $10,000 balance at a 5% annual rate, in forbearance for six months with no payments made. Interest accrues at $10,000 x 0.05 / 12 = $41.67 a month, and over six months that totals $250.00. If this amount capitalizes at the end of the period, the balance becomes $10,250.00. Recalculated over a 120-month term at 5%, the monthly payment on the original $10,000 would be about $106.07, while the payment on the capitalized $10,250 balance rises to about $108.72.

Put this into practice with Debtless

Debtless lets you record a loan's balance and APR and see a projected payoff date, so you can update the balance after a forbearance ends to see how capitalized interest changed the projection. It does not track deferment or forbearance status itself or know which one applies to your loan.

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Common questions

Can I choose deferment instead of forbearance if I qualify for both?

If you meet the eligibility requirements for a type of deferment that does not accrue interest on your loan, it is generally the less expensive option compared with forbearance on the same loan. Ask your servicer which options you currently qualify for.

Does forbearance affect my credit report?

A properly approved forbearance or deferment is generally reported differently from a missed payment, but the details can vary. Confirm with your servicer how the specific pause will be reported before assuming either way.

How do I know if my accrued interest has already capitalized?

Compare your principal balance before and after the pause ended on your account statement or servicer portal. An increase beyond what you expected from any new charges is a sign that interest capitalized.

Sources & further reading

General education for U.S. readers, not individualized financial, legal or tax advice. Examples are hypothetical; lender terms and actual interest calculations can differ. Check your current statements and agreements.

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