If you’re enrolled at least half-time, your federal student loans usually come with an in-school deferment. That means you don’t have to make payments while you’re hitting the books. The interest rules matter. Direct Subsidized loans don’t accrue interest during an in-school deferment because the government covers it. Direct Unsubsidized loans do accrue interest. Grad PLUS and Parent PLUS loans also accrue interest. So while your payment is paused, your balance can still grow.
Forbearance is different. It’s a pause or reduction in payments, but interest keeps accruing on all loan types, including subsidized loans. Forbearance can be mandatory or discretionary. Mandatory forbearance includes things like medical internships, national guard duty, or certain teaching obligations. Discretionary forbearance is up to your servicer and can cover financial hardship, illness, or other situations. During school, you usually don’t need forbearance because deferment is available. But if you’re not eligible for deferment, or if you’ve used up your deferment options, forbearance might be the fallback.
The biggest mistake borrowers make is treating either option as “not my problem right now.“ The loans are still there. Interest is still ticking. If you have unsubsidized loans and you defer for four years, that interest gets capitalized when repayment starts. Capitalization means unpaid interest is added to your principal, and then you pay interest on that new, bigger balance. That can add hundreds or thousands of dollars over the life of your loan. So even a small payment while you’re in school can save you real money later.
Here’s a simple rule: if you can afford anything, pay the interest on your unsubsidized loans while you’re in school. You don’t have to make the full payment. You don’t have to do it every month. But every $20 or $50 you send toward interest keeps it from piling up and capitalizing. Call your servicer and ask how to make an interest-only payment. If you can’t pay, that’s okay. Keep the deferment active and focus on finishing school. But don’t ignore the balance.
Also know that in-school deferment isn’t always automatic. Many schools report your enrollment to the National Student Clearinghouse, and your servicer uses that to apply deferment. But mistakes happen. If you drop below half-time, your deferment can end. That can trigger a grace period and then repayment. Check your servicer account at least once a semester. Confirm your enrollment status and your deferment end date. If something looks wrong, call. Don’t wait until you get a past-due notice.
Forbearance should be a last resort when you’re in school. It’s better than defaulting. But it’s usually more expensive than deferment because interest accrues on subsidized loans too. If you have a choice between deferment and forbearance, take deferment. If you’re not sure which one you qualify for, ask your servicer directly. Say, “I’m enrolled at least half-time. Do I qualify for in-school deferment? If not, what are my forbearance options?“ Get the answer in writing or save the chat transcript.
Another move: keep making payments if you can, even during deferment. You can always pay while your loans are deferred. Those payments go toward interest first, then principal. That can reduce capitalization and shorten your repayment timeline. If you’re working part-time or have a side hustle, consider sending a small amount each month.
If you’re in grad school and your undergrad loans are deferred, the same rules apply. Your subsidized undergrad loans may not accrue interest, but your unsubsidized ones will. If you’re a parent with Parent PLUS loans, those can be deferred while your child is enrolled, but interest accrues. If you’re in a residency or internship after graduation, you might qualify for mandatory forbearance instead of deferment.
Finally, don’t let perfect be the enemy of good. You don’t need to solve your entire student debt while you’re in school. You just need to avoid unnecessary damage. Stay enrolled at least half-time if that keeps your deferment. Check your servicer. Pay interest when you can. Choose deferment over forbearance when you’re eligible. And when repayment starts, have a plan. Deferment and forbearance are tools to buy time, not escape. Use them with your eyes open, and you’ll graduate with less stress.
