There is real anxiety about deferments being eliminated, and it is mostly aimed at the wrong people. The change is keyed to your loan’s disbursement date, and it does not begin until July 1, 2027. If your loans were disbursed before then, nothing described here removes anything from you.
That structure is worth understanding on its own, because it is the opposite of how the 2026 repayment-plan changes work, and confusing the two is easy.
The two mechanisms are not alike
| Repayment plans (July 1, 2026) | Deferments and forbearance (July 1, 2027) | |
|---|---|---|
| Trigger | Any loan made on or after the date | The specific loan disbursed on or after the date |
| Effect | Portfolio-wide. One new loan removes IBR, PAYE and ICR from every loan you own | Loan-only. The new loan lacks these deferments; your older loans keep them |
| Practical risk | Very high. A single new loan or consolidation is enough | Low for existing borrowers. Contained to new borrowing |
Under the repayment-plan rule, taking one new loan converts your entire portfolio. Under the deferment rule, a new loan simply arrives with fewer options while your existing loans are unaffected. Advice that treats these as the same panic is wrong in both directions.
What is actually being eliminated
Exactly two deferments, and only for loans disbursed on or after July 1, 2027.
Unemployment deferment. 34 CFR 685.204(f)(1)(i) provides that for loans disbursed before July 1, 2027, a borrower is eligible during periods that “collectively, do not exceed three years” while seeking and unable to find full-time employment. Paragraph (f)(1)(ii) then states that for loans disbursed on or after July 1, 2027, “a borrower may not receive an unemployment deferment.”
Economic hardship deferment. Paragraph (g)(1)(i) provides the same three-year collective allowance for loans disbursed before the date, and (g)(1)(ii) states that for loans disbursed on or after it, “a borrower may not receive an economic hardship deferment.”
Two details worth holding onto if you still have access: the three-year limits are collective, not per-episode, and an unemployment deferment is not granted beyond six months after you provide your evidence of eligibility, so it has to be renewed with fresh documentation.
What survives untouched
Every other deferment in the regulation is unaffected:
- In-school deferment, including for student Direct PLUS borrowers
- Graduate fellowship deferment
- Rehabilitation training program deferment
- Military service deferment
- Post-active-duty student deferment
- Cancer treatment deferment
If your situation fits one of these, nothing on this page reduces your options regardless of when your loan was disbursed.
Forbearance is being narrowed, not eliminated
The general rule is unchanged: under 34 CFR 685.205(c)(1)(i), “the Secretary grants forbearance for a period of up to one year,” and it is renewable on request.
For loans disbursed on or after July 1, 2027, paragraph (c)(1)(ii) imposes a tighter ceiling: forbearance “for a period that does not exceed nine months within a 24-month period.”
Read the rest of that sentence carefully, because it is where most summaries go wrong. The nine-month cap applies “for forbearances under paragraph (a)(1) of this section,” which is the discretionary forbearance granted when the Department determines that, due to poor health or other acceptable reasons, you are currently unable to make scheduled payments. Mandatory and administrative forbearances live in different paragraphs and are not swept up by that cap.
Forborne interest capitalizes
This one deserves a flat correction, because a claim has been circulating that forbearance no longer causes capitalization, and acting on it is expensive.
34 CFR 685.205(a) says the opposite, in plain terms: “Except as provided in paragraph (b)(9) of this section, if payments of interest are forborne, they are capitalized.”
The single exception at (b)(9) is the forbearance of up to 60 days that the Department grants while it collects and processes documentation for a deferment, forbearance, plan change or consolidation, where “interest that accrues during this period is not capitalized.”
The regulation reinforces this elsewhere. For certain oral-request forbearances, the Secretary must “orally review with the borrower the terms and conditions of the forbearance, including the consequences of interest capitalization,” a requirement that would be incoherent if capitalization did not happen.
Deferment capitalization works differently. Under 34 CFR 685.202(b)(2), for a Direct Loan not eligible for interest subsidies during deferment, unpaid accrued interest is capitalized when the deferment expires. A subsidized loan in a qualifying deferment does not accrue borrower-paid interest in the first place, which is the real advantage deferment holds over forbearance.
The practical question to ask your servicer is not “does interest capitalize.” It is “who holds this loan, what type is it, and what will my balance be the day this ends.” Get the answer in writing, because commercially held FFEL loans run under a different part of the regulations than Direct Loans.
The PSLF interaction people miss
If you are pursuing Public Service Loan Forgiveness, some deferment and forbearance months count toward your 120: cancer treatment, economic hardship, military service and post-active-duty student deferments, plus AmeriCorps, National Guard duty, Department of Defense repayment program, and administrative or mandatory administrative forbearances.
That allowance is switched off entirely while you are enrolled in the Repayment Assistance Plan. A public servant on RAP earns nothing toward PSLF during those months, where the same borrower on IBR would earn credit. See PSLF in 2026.
Choosing between them
- Deferment is generally better when you qualify, especially on subsidized loans, where the government covers interest during qualifying periods.
- Forbearance is easier to get and broader, and you pay for that with capitalized interest.
- Neither is free if you are chasing forgiveness. A $0 income-driven payment and a forbearance both cost nothing this month, but only the $0 payment advances your forgiveness clock. If your income is low enough to qualify for hardship relief, it is usually low enough to produce a very small or zero income-driven payment, and that is the better instrument.
- If your loans predate July 1, 2027, protect the access you have. Nothing here is taken from you unless you borrow again.
This guide is informational and is not legal or financial advice. Deferment and forbearance eligibility depends on your loan types, disbursement dates and who holds your loans, and commercially held FFEL loans follow a different part of the regulations. Confirm with your servicer in writing. Verified August 2026 against the current eCFR text of 34 CFR 685.202, 685.204 and 685.205.