Hair goes through multiple phases.
It'll grow for a while, then fall out. Even beard/head hair. It just has a longer grow phase before falling out.
Which is why short hair grows an inch way faster than long hair does.
How does it know it's short?
Have you ever seen someone's arm after they have a cast taken off? Your arm hair is short because it's being rubbed off by random interactions with things (rubbing against shirts you take off/put on, your body, general use). A person with a cast on their arm protects those hairs, and when they finally get the cast off, they look like a werewolf.
It's not a satisfying answer, but your DNA tells it.
Short hair doesn't grow faster. It's a myth.
So I have a follow up question, let's say someone has 20cm long hair, all of them are that long, we don't see 5/10cm hair still growing to get to 20, I'm confused, how does that work?
A better question would be, "when does hair know when to fall off?"
Hair never stops growing.
Edit: when I say "hair," I mean one single strand of hair. That single strand of hair will eventually fall off. The thing is that not all strands fall off at the same time. So hair, the full head of hair, seems to be of the same length (especially if we keep getting haircuts.) But it's not like all hairs grow and then all of them collectively say "ok, everyone, let's stop growing!" and stop. No, each single strand of hair falls off, but at different times.
No, hair does stop growing.
Hair grows in phases and cycles. At the end of the cycle, it falls out.
The difference between body hair and the hair on your head is that the latter one has cycles measuring years, the other weeks.
This is the correct answer. Here's a little graphic on the phases.
No, hair does stop growing.
Hair grows in phases and cycles. At the end of the cycle, it falls out.
This is unhelpfully pedantic given the OP's misconception.
Hair does not (appear to) stop getting longer because it stops growing. It (appears to) stop getting longer because older (longer) hairs fall out.
