Pausing Payments Doesn't Always Pause Interest
When you put your federal student loans into deferment or forbearance, your monthly payments stop โ but interest often doesn't. Direct Subsidized Loans are the one exception: the government covers interest during deferment (though not during forbearance). Direct Unsubsidized Loans and PLUS Loans keep accruing interest the entire time you're paused, regardless of whether it's deferment or forbearance. The longer the pause and the larger your balance, the more that unpaid interest adds up โ and when repayment resumes, that accrued interest is typically capitalized, meaning it gets folded into your principal so future interest is calculated on a larger amount. If you can't make full payments, even paying just the accruing interest during your pause can keep your balance from growing and save you money over the life of the loan.
How It's Calculated
| Step | Item | Formula |
|---|---|---|
| 1 | Interest Accrued | Balance ร Annual Rate ร (Months รท 12), or $0 if subsidized deferment |
| 2 | Average Monthly Interest | Interest Accrued รท Months |
| 3 | Estimated Balance After | Balance + Interest Accrued |
Frequently Asked Questions
Interest does not accrue on Direct Subsidized Loans during deferment, but it always accrues on Unsubsidized and PLUS Loans, and on any loan type during forbearance.
It's typically capitalized โ added to your principal balance โ which increases the amount your future interest is calculated on.
No. Deferment can pause interest on subsidized loans, but forbearance always allows interest to accrue on any loan type.
โป This is a simplified simple-interest estimate. Your servicer's actual daily interest calculation may produce a slightly different result.