What is student loan forbearance?
Student loan forbearance is a program that lets you temporarily halt your student loan payments. The government offers several types of federal student loan forbearance, and many private lenders offer their own versions of forbearance as well.
Forbearance is a necessary option for borrowers who are struggling, but there are some downsides. Here’s what to know about your options and when to put your student loans on hold.
What is student loan forbearance?
Student loan forbearance is an option that temporarily pauses your monthly payments. Typically it is only available for a few months at a time, and you’re limited in how much forbearance you can use during the life of your loan.
Federal student loan forbearance
When it comes to federal student loans, there are two main types of forbearance options: general and mandatory. Which one is right for you depends on the circumstances leading you to forbearance.
General forbearance
General forbearance, also referred to as discretionary forbearance, is granted and approved by your student loan servicer if you’re experiencing financial hardship. Loans eligible for general forbearance include Direct, Federal Family Education (FFEL) Program and Perkins Loans.
Your eligibility for this type of forbearance is determined by your loan servicer, so it’s not guaranteed — but you’ll have your best chance of qualifying if you can prove that medical expenses, a change of employment or other circumstances are affecting your finances.
General forbearance may be granted for up to 12 months at a time, with a total limit of three years. You can apply for general forbearance using the U.S. Department of Education’s request form.
Mandatory forbearance
Unlike general forbearance, mandatory forbearance is guaranteed if you meet the requirements. The circumstances that will grant you forbearance are:
- You’re serving in AmeriCorps and you’ve received a national service award for your position.
- You’re performing service under a Department of Defense Student Loan Repayment Program.
- You’re participating in a medical or dental internship or residency program.
- You’re not eligible for military deferment but you’re currently a member of the National Guard and have been activated by a governor.
- Your federal student loan payments exceed 20 percent of your total monthly gross income.
- You’re pursuing teacher loan forgiveness.
With a few exceptions, mandatory forbearance is available only for Direct Loans and FFEL Program loans. If you meet one of the qualifications, your servicer is required to grant you forbearance for up to 12 months, though you can request an extension after the initial forbearance expires.
Private student loan forbearance
One of the benefits of federal student loans is that forbearance is standardized across the board for borrowers, and it is guaranteed if you meet certain requirements. The length of forbearance is also fairly generous — up to 12 months in most cases, with the option to apply for more.
With that said, private student loans do often offer some version of forbearance. It’s common to find forbearances lasting around three months, but the length and qualification requirements vary by lender. In many cases, lenders don’t advertise their exact offerings; to see if you qualify or to request a forbearance, you’ll need to reach out to your lender. Be prepared to provide proof of financial hardship when you apply.
What is administrative forbearance?
While administrative forbearance can refer to a forbearance you enroll in while applying for a federal program, most recently the term has been used to describe the government’s coronavirus student loan relief.
Millions of federal student loan borrowers have been automatically enrolled in an optional forbearance of their principal and interest payments since March 2020. The administrative forbearance period has been extended multiple times by the Education Department but is currently set to expire on May 1, 2022.
What’s the difference between forbearance and deferment?
Forbearance and deferment are both methods of temporarily pausing your student loans. Here are some of the primary differences:
- Interest accrual: Interest accrues during all forbearance periods, but it may not for some types of deferment.
- Eligibility: Deferment is typically guaranteed if you meet the requirements. Some types of forbearance are up to the discretion of your servicer.
- Length: Most forbearances are fairly limited, with federal forbearance limited to 12 months at a time. Some deferments can last years.
Deferment is often the best choice for pausing payments, especially for borrowers who are going back to school, enlisting in the military or entering a period of unemployment. However, forbearance is also a good option if you don’t meet any of the requirements for deferment.
Should you apply for student loan forbearance?
Forbearance is not a long-term solution — and because interest will accrue during your forbearance, you should think carefully about whether it’s the right choice for you.
With that said, student loan expert Mark Kantrowitz says that it’s better for a borrower to be in forbearance than in default. When you default on your student loans, your overdue balance could be turned over to a collection agency and could lead to a potential court case. “Delinquency and default hurt the borrower’s credit scores, while an authorized deferment or forbearance usually does not ding the credit score (or if it does, not as much),” says Kantrowitz.
Forbearance is not your only defense against student loan default. If you’re anticipating long-term financial hardship, consider an income-driven repayment plan to make your federal student loan payments more manageable. You can also refinance your loans to bring down your monthly payment.
Whether or not you choose to apply for forbearance depends on your individual circumstances. If you’re in between jobs or undergoing medical treatment for a few months, forbearance may make more sense than changing your repayment plan. If you need more sustainable change for your student loans, though, consider looking elsewhere.
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