If you have federal student's loan and are finding it difficult to make the monthly payments on the loan, you can opt for forbearance or deferment of school loan. However, in order to choose the correct option, you should know the difference between forbearance and deferment of school loan.

Before you decide to select forbearance or deferment of a student loan, it is also imperative that you understand the consequences of defaulting on the loan. The moment a person defaults on loans, including student loans, his or her credit rating will be adversely damaged. A student loan is similar to any other loan that a person takes; and any default is immediately notified to the credit reporting bureaus. The adverse credit rating and a history of default will make it rather difficult for a person to get approval for future loans or credit cards. In addition, the amount of the loan will end up increasing due to the late fees, collection fees as well as penalties levied by the lender.

A deferment school loan exempts a student from paying a loan for a specified period of time. This is a temporary reprieve given to students due to financial hardship, going back to school to study or any reason that is approved by the lender. During the deferment, the student does not have to make the normal payments on the loan, and the interest on the loan does keep accruing. Usually, deferment of school loan is granted for 1 year, but at times the student can reapply for the deferment a second or third time. When the student reapplies for deferment, his or her financial situation is assessed before granting it.

On the other hand, forbearance of loan is similar to deferment, but the interest on the loan amount continues to accrue even though the student is excused from making the monthly payments. Compared to a deferment, it is easier for a student to get forbearance and this too is granted for up to 1 year. However, during the non-payment period, the student can opt to pay just the interest amount, or he or she can let the interest accrue and get added to the overall pending balance of the student loan. It is suggested that a student try to pay the interest when opting for forbearance if he or she has the means. Usually, reasons for granting forbearance include poor health, disability, the monthly payments on the loan exceed 20 percent of the student's monthly income, inability to pay the monthly payments, or unexpected personal problems.

If a student is facing problems paying the student loan, it is best to speak honestly to the lender and figure out whether he or she qualifies for forbearance or deferment of student loan. Also, the lender would help the student select the right option.

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