Forbearance on student loans is a temporary pause or reduction of your monthly loan payments. It is an option for borrowers who are facing financial hardship but do not qualify for an income-driven repayment plan or deferment. When you enter forbearance, interest continues to accrue on all loan types, which means your total debt may increase during the pause.
How Does Student Loan Forbearance Work?
Forbearance allows you to stop making payments or make smaller payments for a set period of time. The U.S. Department of Education offers two main types: general forbearance and mandatory forbearance. General forbearance is granted at the lender’s discretion, while mandatory forbearance must be granted if you meet specific conditions.
During forbearance, interest continues to build on your loans. If you have unsubsidized loans, that interest is added to your principal balance when the forbearance ends. If you have subsidized loans, the government does not pay the interest during forbearance (unlike deferment), so you will owe it later.
Types of Forbearance
General Forbearance
General forbearance is for borrowers who have financial difficulties but do not meet the criteria for mandatory forbearance. You can request it for up to 12 months at a time, and there is no maximum total limit. Your loan servicer decides whether to grant 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, teaching in a program that qualifies for loan forgiveness, or having monthly payments that exceed 20% of your total monthly gross income. You must apply and provide documentation.
Student Loan Deferment vs. Forbearance
Deferment is another option to pause payments, but it is often better because interest does not accrue on subsidized loans during deferment. Forbearance is usually a last resort because interest always accrues. The table below compares the two options.
| Feature | Forbearance | Deferment |
|---|---|---|
| Interest on subsidized loans | Accrues (you owe it) | May not accrue (government pays) |
| Eligibility | Financial hardship, medical residency, etc. | Enrollment, unemployment, economic hardship |
| Maximum time (typical) | 12 months at a time, no total cap | Up to 3 years for economic hardship |
| Application | Request from servicer | Request with documentation |
How to Apply for Forbearance
To apply for forbearance, contact your loan servicer directly. You can do this online, by phone, or by mail. You will need to explain why you need forbearance and provide supporting documents, such as medical bills or proof of income.
Here are the steps to follow:
- Log in to your loan servicer’s website and find the forbearance request form.
- Complete the form with your personal and loan information.
- Provide any required documentation, like a letter from your employer or medical records.
- Submit the form and keep a copy for your records.
Your servicer must respond within a certain time frame. If you are denied, ask for the reason and consider other options like income-driven repayment plans.
Pros and Cons of Forbearance
Pros
Forbearance provides immediate relief from monthly payments. It can help you avoid default and keep your loans in good standing. It also gives you time to improve your financial situation.
Cons
The biggest downside is that interest continues to grow. This can increase your total loan balance significantly. Also, forbearance does not count toward loan forgiveness programs like Public Service Loan Forgiveness (PSLF).
Alternatives to Forbearance
Before choosing forbearance, explore other options that might be less costly. Income-driven repayment (IDR) plans adjust your payment based on your income and family size. These plans can lower your payment to as little as $0 per month, and they count toward loan forgiveness after 20 or 25 years.
Another option is deferment, especially if you have subsidized loans. You can also ask your servicer about changing your repayment plan to a graduated or extended plan. These options may lower your monthly payment without stopping interest.
How Long Can You Stay in Forbearance?
General forbearance is typically granted for up to 12 months at a time. You can request a renewal, but your servicer may ask for updated information. Mandatory forbearance can be granted for 12 months and must be renewed annually. There is no overall time limit for general forbearance, but staying in forbearance for years can lead to a much larger debt.
Impact on Credit Score and Future Borrowing
Forbearance itself does not directly hurt your credit score, because you are making a formal agreement with your lender. However, if you miss payments before entering forbearance, that will affect your score. Also, the increased loan balance from accrued interest can affect your debt-to-income ratio, which may make it harder to get a mortgage or car loan later.
What Happens After Forbearance Ends?
When your forbearance period ends, your regular payments resume. You will receive a statement showing your new balance, which includes any accrued interest. If you did not pay the interest during forbearance, it may be capitalized (added to your principal). This means future interest is calculated on a higher balance, so you will pay more over time.
Practical Tips for Using Forbearance Wisely
If you decide to use forbearance, consider paying at least the interest that accrues each month. This prevents your balance from growing. Keep in touch with your servicer and plan for when payments restart. Also, set a reminder to re-evaluate your situation every few months.
In summary, forbearance on student loans is a temporary relief tool that pauses or reduces payments, but it comes with the cost of accruing interest. It can be helpful in a short-term crisis, but it is not a long-term solution. Always compare alternatives like income-driven repayment or deferment, and contact your loan servicer to discuss the best option for your situation.
Frequently Asked Questions
What is forbearance on student loans and how does it work?
Forbearance is a temporary pause or reduction of your student loan payments, but interest continues to accrue on all loans during the period.
How do I apply for student loan forbearance?
You apply by contacting your loan servicer and submitting a forbearance request form, along with any required documentation like proof of financial hardship.
Does forbearance hurt your credit score?
Forbearance itself does not directly hurt your credit score, but missing payments before or during the process can negatively affect it.
How long can you stay in forbearance?
General forbearance is usually granted for up to 12 months at a time, and you can request renewals, but there is no total limit.
Is deferment better than forbearance?
Deferment is often better because interest may not accrue on subsidized loans, whereas forbearance always accrues interest.
