Forbearance on student loans means you can temporarily pause or reduce your monthly payments for a set period, usually up to 12 months, if you’re facing financial hardship. Unlike deferment, interest continues to accrue on all loan types, including subsidized loans. This option can provide relief, but it’s important to understand how it affects your total loan cost.
How Student Loan Forbearance Works
When you enter forbearance, your loan servicer agrees to let you stop making payments or make smaller payments for a limited time. You must request forbearance from your servicer, and they will review your situation to decide if you qualify. Interest continues to build on your loan balance during this period, and if you don’t pay that interest, it may be added to your principal (capitalization).
Types of Forbearance
There are two main types of forbearance: general and mandatory. General forbearance is granted at the servicer’s discretion for reasons like illness or financial hardship. Mandatory forbearance is required by law for certain situations, such as serving in a medical or dental residency, or if your monthly payments exceed 20% of your gross income.
- General forbearance: For financial hardship, illness, or other personal situations.
- Mandatory forbearance: For qualifying conditions like teaching service or National Guard duty.
- Student loan debt burden: If your payments are too high relative to income.
- Other exceptional circumstances: Such as a natural disaster or military mobilization.
Forbearance vs. Deferment: Key Differences
Many borrowers confuse forbearance with deferment, but they are not the same. Deferment also pauses payments, but for subsidized federal loans, interest does not accrue during deferment. Forbearance, on the other hand, always accrues interest on all loan types.
| Feature | Forbearance | Deferment |
|---|---|---|
| Interest on subsidized loans | Accrues | Does not accrue |
| Eligibility | Financial hardship, servicer approval | Enrollment, unemployment, economic hardship |
| Duration | Up to 12 months at a time, max 3 years | Varies by reason, often 3 years |
| Application | Request from servicer | Request with documentation |
Pros and Cons of Using Forbearance
Forbearance can be a lifeline when you can’t make payments, but it has trade-offs. The main benefit is immediate relief from monthly payments, which can free up cash for other needs. However, because interest continues to grow, you’ll end up paying more over the life of the loan.
When Forbearance Makes Sense
Consider forbearance if you have a short-term crisis, like a medical emergency or temporary job loss, and you expect to resume payments soon. It’s also useful if you don’t qualify for income-driven repayment plans or deferment. But if you can afford any payment, even a small one, an income-driven plan might be better.
Alternatives to Forbearance
Before choosing forbearance, explore other options. Income-driven repayment plans adjust your payment based on income and family size, and they can be as low as $0 per month. Deferment is better if you’re in school or unemployed. Loan consolidation or refinancing (with caution) might also lower your payment, but they have their own risks.
How to Apply for Forbearance
To request forbearance, contact your loan servicer directly. You can often do this online, by phone, or by submitting a paper form. You’ll need to explain why you need it and provide supporting documents, such as medical bills or proof of unemployment. The servicer must respond within a reasonable time, usually 30 days.
Once approved, forbearance typically lasts up to 12 months, and you can request another if needed, but total forbearance is usually limited to 36 months over the life of your federal loans. Keep track of your loan balance and interest capitalization, because after forbearance ends, your monthly payment may increase.
Impact on Credit and Loan Forgiveness
Forbearance does not directly hurt your credit score because you’re not missing payments. However, if interest capitalization increases your balance, your debt-to-income ratio may worsen. Also, forbearance periods generally do not count toward Public Service Loan Forgiveness (PSLF) or income-driven repayment forgiveness.
If you’re pursuing PSLF, you must be in an income-driven repayment plan, and forbearance months do not count. For other forgiveness programs, forbearance time is usually excluded. Always check with your servicer about how forbearance affects your specific forgiveness goals.
Practical Tips for Managing Forbearance
If you decide forbearance is right for you, follow these tips to minimize the downsides. First, try to pay at least the interest that accrues during forbearance to avoid capitalization. Second, set a reminder to re-evaluate your situation before the forbearance ends. Third, keep documentation of your hardship for future requests.
Also, consider making partial payments if you can—some servicers allow reduced payments instead of full pause. Finally, stay in touch with your servicer and respond to any notices about your forbearance status. Missing a deadline could lead to default.
Summary
Forbearance is a temporary pause or reduction in student loan payments for borrowers facing hardship, but interest continues to accrue on all loans. It can be helpful for short-term problems, but it increases your total cost and may not count toward forgiveness. Before choosing forbearance, compare it with deferment and income-driven plans, and always talk to your servicer to make an informed decision.
Frequently Asked Questions
What does forbearance mean for student loans?
Forbearance allows you to temporarily stop or reduce your student loan payments for a set time, usually up to 12 months, but interest continues to accrue on all loan types.
How long can I stay in forbearance on my student loans?
For federal loans, forbearance is typically granted for up to 12 months at a time, with a maximum of 36 months total over the life of the loan.
Does forbearance hurt my credit score?
No, forbearance itself does not hurt your credit because you are not missing payments, but it can indirectly affect your credit if your loan balance increases and your debt-to-income ratio worsens.
Can I get forbearance on private student loans?
Private lenders may offer forbearance, but it is not required by law, and terms vary by lender; you must contact your lender to ask about options.
Is forbearance better than deferment?
Deferment is often better because on subsidized federal loans, interest does not accrue during deferment, whereas forbearance always accrues interest.
