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What is Forbearance for Student Loans?

Forbearance is when your student loan payments are temporarily paused or reduced. It’s useful if you’re facing financial difficulty, like losing a job or dealing with illness.

How Forbearance Works

  • Temporary Break: Forbearance gives you a break from making loan payments for a set time, usually up to 12 months.
  • Interest Continues: Even though you don’t have to make payments during forbearance, interest keeps building on most loans, which increases your overall debt.

Types of Forbearance

  1. General Forbearance:
    • Who qualifies: Available to borrowers who need help due to temporary financial struggles or personal hardships.
    • How long it lasts: You can get up to 12 months at a time, and you can apply for it multiple times if necessary.
  2. Mandatory Forbearance:
    • Who qualifies: Available if you meet specific conditions, like being in a medical or dental internship, or if your monthly payments are too high relative to your income.
    • How long it lasts: This also lasts up to 12 months, and you don’t need to show hardship — as long as you meet the qualifications, you’re eligible.

Who Can Apply for Forbearance?

  • General Forbearance: Most borrowers can apply if they’re having trouble making payments due to financial or personal issues.
  • Mandatory Forbearance: This is for borrowers who meet specific criteria, such as medical residents or borrowers who have a high debt-to-income ratio.

Advantages of Forbearance

  • Financial Relief: Forbearance gives you temporary relief from making payments, which can be helpful if you’re struggling financially.
  • Prevents Default: It can help you avoid falling behind on payments and going into default while you recover financially.

Disadvantages of Forbearance

  • Interest Continues to Grow: Even though you aren’t making payments, interest still adds up, which means your loan balance will increase.
  • Higher Total Debt: Because of the added interest, you could end up owing more in the long run.
  • Only Temporary: Forbearance is not a long-term solution; you will eventually have to start making payments again.

How to Apply for Forbearance

  1. Contact Your Loan Servicer: Reach out to the company handling your loans to request forbearance.
  2. Provide Proof: You might need to provide documentation to show why you need forbearance, such as financial hardship or other qualifying reasons.
  3. Wait for Approval: Your loan servicer will review your request and let you know if you qualify.

Forbearance vs. Deferment

  • Deferment: Like forbearance, deferment pauses payments, but interest doesn’t always accrue for certain types of loans (like subsidized loans). Deferment is often granted for situations like being in school or military service.
  • Forbearance: Interest always accrues (except for subsidized loans in some cases), and while it’s more flexible, it may be more costly in the long run.

Key Points to Remember

  • Not a Long-Term Fix: Forbearance is a temporary solution, not a permanent fix to financial problems. It’s best used when you just need a short break.
  • Interest Impact: The longer you are in forbearance, the more interest you’ll accrue, meaning your total loan amount could increase significantly.