Student Loan Forbearance
Student loan forbearance is a period in which you aren’t required to make a payment on your student loans. You can temporarily make a smaller payment, but the principal amount of the loan will continue to accrue interest. Forbearance can help you reduce your monthly expenses in the short term, however, you won’t make any progress in terms of paying off the loan or loan forgiveness. Learn more about student loan forbearance and when to consider this option.
What is Student Loan Forbearance?
If you can’t afford your student loan payments, you have the option of applying for student loan forbearance. If your request gets approved, you don’t have to make a monthly payment on your student loans.
During the forbearance period, the principal amount of the loan will continue to accrue interest. You can choose to pay down the interest as it accrues every month. If you don’t, the interest may get capitalized or lumped into the principal amount at the end of the period, which means you will have to pay more over the life of the loan. The interest is only capitalized on Direct Loans and Federal Family Education Loan (FFEL) Program loans. It is never capitalized on Federal Perkins Loans.
How to Apply for Student Loan Forbearance
If you decide you need a period of forbearance, you will need to contact your lender or student loan servicer and request the proper form. You should be able to fill it out online or mail in a hard copy. On the application form, you may need to include information about your loan, including the original loan amount, how much you still owe and your current financial information to see if you qualify for forbearance.
Who is Eligible for Student Loan Forbearance?
Depending on your circumstances, you may qualify for either general forbearance or mandatory forbearance.
General forbearance is when the lender decides to grant forbearance at their own discretion. General forbearance can apply to Direct Loans, Federal Family Education (FFEL) Program loans, and Perkins Loans. It may be granted for no more than 12 months at a time. If you are still having trouble making the monthly payment, you can apply for another forbearance, but the current limit for general forbearance is capped at three years. Lenders often refer to established eligibility requirements when deciding whether to approve the application. You will need to show the lender why you’re unable to make your monthly payment. Acceptable reasons usually include:
- A change or sudden loss of employment.
- Medical expenses or debts.
- Financial hardship.
Mandatory forbearance is when the lender has no choice in terms of approving the application. They are required by law to grant forbearance. It only applies to Direct Loans and FFEL Program loans. Mandatory forbearance is only granted for 12 months at a time. However, you can apply for another period once your current period expires. You may be eligible for mandatory forbearance if you:
- Serve in the AmeriCorps and received a national service award.
- Qualify for a partial repayment plan under the U.S. Department of Defense Student Loan Repayment Program.
- Serve in a medical or dental internship or residency program and meet the requirements.
- Serve in the National Guard and have been activated by a governor, but you are not eligible for a military deferment.
- Have student loan payments totaling 20% or more of your total monthly gross income for up to three years.
- You are a performing teaching service that would qualify you for teacher loan forgiveness.
Alternatives to Student Loan Forbearance
While student loan forbearance can give you a much needed respite if you are having a hard time making your student loan payments, it does come with some drawbacks. First, you will not be making progress towards paying off your student loans. Forbearance periods also don’t count toward any loan forgiveness programs. If you don’t pay off interest during the forbearance period, your loan balance will continue to grow as well.
Consider applying for an income-driven repayment (IDR) plan instead of forbearance. If you are approved, the lender will adjust the amount you owe every month based on your gross monthly income and the size of your family or household. In some cases, your monthly payment may be as low as $0 a month. There is no limit to the number of times you can apply for an IDR plan. You still have the option of paying more than the necessary amount, so you can pay down the principal more quickly if you have extra funds or increase your income.
Help is available if you can’t afford your monthly student loan payments. Contact your lender or talk with a student loan counselor to learn more about your payment options.