Student loan forbearance is a temporary pause or reduction of your monthly student loan payments. It is an option for borrowers who are facing financial hardship, such as job loss, medical expenses, or other difficulties. During forbearance, you do not have to make payments, but interest continues to accrue on your loans, which means your total debt may increase.
How Does Student Loan Forbearance Work?
When you enter forbearance, your loan servicer allows you to stop making payments or reduce your payment amount for a set period. For federal student loans, forbearance is typically granted in 12-month increments, up to a maximum of 36 months over the life of your loan. You must apply for forbearance through your loan servicer, and you may need to provide documentation of your financial hardship.
Important: Interest continues to grow during forbearance on all loan types, including subsidized loans. If you do not pay the interest as it accrues, it may be capitalized (added to your principal balance), increasing the amount you owe in the long run.
Types of Forbearance
There are two main categories of forbearance for federal student loans: general forbearance and mandatory forbearance.
General Forbearance
General forbearance is granted at the discretion of your loan servicer for reasons such as financial hardship, illness, or other situations. You must request it, and the servicer decides whether to approve it.
Mandatory Forbearance
Mandatory forbearance is required by law if you meet certain conditions. These include serving in a medical or dental internship or residency, serving in AmeriCorps, or having monthly student loan payments that exceed 20% of your total monthly gross income.
Forbearance vs. Deferment: What’s the Difference?
Many borrowers confuse forbearance with deferment. Both allow you to pause payments, but they differ in how interest accrues. With deferment, interest does not accrue on subsidized loans during the deferment period. With forbearance, interest always accrues on all loans.
| Feature | Forbearance | Deferment |
|---|---|---|
| Interest accrual on subsidized loans | Yes, interest accrues | No, interest does not accrue |
| Eligibility criteria | Financial hardship or other reasons | Specific situations like school enrollment, unemployment, or military service |
| Application process | Request through loan servicer | Request through loan servicer with proof of eligibility |
| Maximum duration | Up to 36 months total | Varies by type, often up to 3 years |
How to Apply for Forbearance
Applying for forbearance is a straightforward process. Here are the steps:
- Contact your loan servicer to request a forbearance application.
- Complete the application form and provide any required documentation, such as proof of income or medical bills.
- Submit the application and wait for approval.
- Once approved, your servicer will confirm the forbearance period and any terms.
Tip: Always apply before you miss a payment. Missing payments can lead to delinquency or default, which damages your credit score.
Pros and Cons of Forbearance
Pros
Forbearance provides immediate relief from monthly payments, which can help you manage temporary financial setbacks. It also prevents your loans from going into default.
Cons
The biggest downside is that interest continues to accrue, increasing your total debt. Additionally, forbearance periods do not count toward student loan forgiveness programs, such as Public Service Loan Forgiveness (PSLF).
Alternatives to Forbearance
Before choosing forbearance, consider other options that might be less costly:
- Income-driven repayment plans: These adjust your monthly payment based on your income and family size, and they may be as low as $0 per month.
- Deferment: If you qualify, deferment may be a better option because interest does not accrue on subsidized loans.
- Loan consolidation: This can extend your repayment term, lowering monthly payments, but it may increase total interest paid.
- Graduated repayment: Payments start low and increase every two years, which might help if your income is expected to rise.
Impact of Forbearance on Your Credit
Forbearance itself does not directly harm your credit score. However, if you stop making payments, your loan servicer may report the loan as in forbearance, which is not negative. Yet, if you miss payments before forbearance is approved, those missed payments will appear on your credit report and can lower your score.
Key Takeaways
Student loan forbearance is a helpful tool for temporary financial relief, but it comes with the cost of accruing interest. Before applying, weigh the pros and cons and explore alternatives like income-driven repayment plans. Always communicate with your loan servicer to understand your options and keep your loans in good standing.
Frequently Asked Questions
What is a student loan forbearance?
Student loan forbearance is a temporary pause or reduction of your monthly loan payments, granted by your loan servicer during financial hardship.
How long can I get forbearance on my student loans?
For federal student loans, forbearance is typically granted for up to 12 months at a time, with a maximum of 36 months over the life of the loan.
Does interest accrue during forbearance?
Yes, interest accrues on all loans during forbearance, including subsidized loans, which can increase your total debt if unpaid.
How do I apply for forbearance?
Contact your loan servicer to request a forbearance application, complete it, and submit any required documentation. Approval is not automatic.
Is forbearance the same as deferment?
No, deferment may not accrue interest on subsidized loans, while forbearance always accrues interest on all loans.
