Student Loan Forbearance: How it Works and Where to Get it
If you’re experiencing financial hardship, student loan forbearance can help by allowing you to pause your student loan payments for a specified amount of time. It’s available for both federal loans and most private loans, but there are limits.
If you find yourself having difficulty making payments on your federal or private student loans, you could potentially put your loans into forbearance. Both the federal government and private student loan companies have specific rules for when you can put loans into forbearance and how long loans can stay there.
When loans are in forbearance, you pause payments. This can provide more wiggle room in your budget. However, interest keeps accruing, so you’ll end up with a bigger loan balance when you start paying your loans back. You need to understand the pros and cons of student loan forbearance — and how forbearance differs from loan deferment — so you can make the right choice.
On this page:
- What is Forbearance?
- Private Student Loan vs. Federal Student Loan Forbearance
- Types of Federal Loan Forbearance
- Pros of Student Loan Forbearance
- Cons of Student Loan Forbearance
- Alternatives to Forbearance
- How is Forbearance Different from Deferment?
What is Forbearance?
When loans are put into forbearance, you do not have to make the monthly payment on the loan that would ordinarily be due. Putting loans into forbearance makes sense in times of financial hardship such as is you have to take maternity leave or a medical leave from work.
Lenders will evaluate your request for forbearance; in some cases, however, your federal loan servicer must allow you to put your loans into mandatory forbearance. The rules for when you can put your loan into forbearance — and how long your loan can stay there — depends on whether you have federal or private loans.
Your lender continues to charge interest on loans in forbearance, which means any unpaid interest is capitalized and added to your principal loan balance unless you choose to make interest-only payments. If you don’t, you essentially end up paying interest on interest.
Private Student Loan vs. Federal Student Loan Forbearance
There are some big differences between federal and private student loan forbearance.
- The rules for federal student loan forbearance are standard and apply to all federal loans.
- Private lenders have discretion for when forbearance is permitted and how long loans can be in forbearance.
- Federal student loans typically offer more options for forbearance and allow loans to be put into forbearance for longer.
Because it’s easier to put federal loans into forbearance, borrowers should always exhaust their federal student loan options first before resorting to private student loans.
Types of Federal Loan Forbearance
There’s more than one type of forbearance: general forbearance, which is granted at the discretion of the loan servicer; and mandatory forbearance, which the loan servicer must grant.
When you apply for general forbearance, your loan servicer has the discretion to grant or deny your request. You can qualify for general forbearance for Perkins Loans, Direct Loans, and loans made through the FFEL Program. General forbearance is granted for no more than one year at a time. If you’re still having financial issues at the end of 12 months, you’ll need to reapply for forbearance with your lender.
There is no limit to the number of months that Direct Loans and FFEL Program loans can be put into forbearance, although your loan servicer may set a maximum limit. If you have Perkins Loans, you cannot put them into general forbearance for more than three years over the life of the loan.
If you can meet the qualifying requirements for mandatory forbearance, your loan servicer must grant your request. You’ll still need to apply, but your lender doesn’t have the discretion to deny you.
You can qualify for mandatory forbearance if:
- You’re in an eligible medical internship, dental internship, or residency program.
- The total amount of your monthly payment for all student loans equals 20% or more of your gross income for up to three years.
- You are serving in an AmeriCorps position for which you received a national service award.
- You’re doing teaching work that qualifies you for teacher loan forgiveness.
- You qualify to have your loans partially repaid under the U.S. Department of Defense Student Loan Repayment Program.
- You’re a National Guard Member who is not eligible for a military deferment, and your unit has been activated by the governor.
The specific rules for mandatory forbearance differ by loan type. For example, Direct Loans and FFEL Program Loans only qualify when you’re in a dental, medical, or residency program; when you’re a National Guard Member; because you qualify for teacher loan forgiveness; or because you qualify for DOD loan repayment.
However, you can also qualify for mandatory forbearance for Perkins Loans if your payments exceed 20% of your gross income.
Mandatory forbearance can also be granted for a maximum of 12 months, after which you will need to reapply for another mandatory forbearance if you still qualify.
Pros of Student Loan Forbearance
Forbearance has some significant advantages:
- You can get some flexibility in your budget. If you’re having a hard time paying your bills, pausing your student loan payments temporarily can provide relief.
- You won’t hurt your credit by missing payments. It is always better to put loans into forbearance than to miss payments.
- You can avoid defaulting on your loan. Failing to make timely student loan payments can have very serious consequences, including making you vulnerable to legal action. By putting your loan into forbearance and pausing payments, you don’t risk default when you can’t pay your bills.
Cons of Student Loan Forbearance
That said, forbearance does come with its share of disadvantages:
- You’ll delay repayment of your loan. Pausing payments will extend the overall life of your loan.
- Interest continues accruing. If you don’t pay interest while loans are in forbearance, your loan balance will grow each month as interest keeps accruing.
- You could end up paying interest on interest. Interest is capitalized when your loans are in forbearance, which means it is added to the principal balance. This means you pay interest on a larger loan balance, which increases your total repayment costs.
If you can qualify for deferment instead of forbearance, you can prevent at least some interest from accruing.
Alternatives to Forbearance
If you’re having trouble making your student loan payments, there are some alternatives to forbearance:
- You could change your loan repayment plan. There are several federal loan repayment options that cap your monthly loan payments as a percentage of your income. You could switch to one of these plans to lower the amount you pay each month and get more wiggle room in your budget.
- You could consolidate your student loans. If your federal loans are eligible for consolidation, consolidation could open the door to an extended repayment plan of up to 30 years. Extending your repayment terms can also result in lower payments. (Learn more: student loan consolidation guide)
- You could refinance your student loans. If you refinance student loan debt, it’s possible you could lower both your interest rate and monthly payment. This tends to be a better option for private student loans, as consolidating federal loans means giving up many important borrower benefits. (Learn more: refinance student loans guide)
You should consider all alternatives before deciding whether student loan forbearance is best for you.
How is Forbearance Different from Deferment?
Those with federal student loans also have another option to pause payments: deferment. Student loan deferment is different from forbearance, although the two programs are often confused because both allow you to temporarily take a break from making your student loan payments.
The big difference between deferment and forbearance is that when you put loans into deferment, you are not responsible for paying interest that accrues on:
- Direct Subsidized Loans
- Subsidized Federal Stafford Loans
- Federal Perkins Loans
- The subsidized portion of your Direct Consolidation Loans or FFEL Consolidation Loans
You still pay interest on other federal student loans in deferment, including Direct Unsubsidized Loans; Unsubsidized Federal Stafford Loans; Direct PLUS Loans; FFEL Plus Loans; and the unsubsidized portion of Direct Consolidation Loans and FFEL Consolidation Loans.
When loans are in forbearance, you are always responsible for paying interest on all federal loans, including Perkins Loans and subsidized loans.
Qualifying for deferment can also be more difficult. You can only qualify for deferment under limited circumstances. For example:
- You’re enrolled half-time in an eligible academic program.
- Your child is enrolled at least half-time in an eligible academic program (if you have a Parent PLUS loan).
- You’re enrolled in an approved graduate fellowship program or rehabilitation training program.
- You can’t find full-time employment for up to three years.
- You’re in the Peace Corps.
- You’re experiencing economic hardship.
- You’re currently (or were recently) on active duty military service.
You can qualify for forbearance, on the other hand, due to a change in employment, financial difficulties, medical expenses, or other reasons acceptable to your loan servicer.
When you put federal or private student loans into forbearance, you can keep more of your money each month since you’ll pause payments.
However, evaluate your options carefully before taking the plunge — student loan forbearance will increase your overall balance over time.
Author: Christy Rakoczy
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