Student Loan Forbearance is a program that allows you to temporarily pause or reduce your student loan payments. It is an agreement between you and your lender to help you get through a period of unusually high expenses or reduced income. Just so you know, it is only available for 12 months or less.
Unlike decrement, with student loan forbearance, you will be responsible for accumulated interest when the period is over. However, you will have to pay the interest in order to avoid a larger balance. Student loan Forbearance is mostly available for federal student loans. Although private lenders may also offer this option, don’t expect much generosity from federal loans. Read to the very end to learn more about how student loan forbearance works and the different types available.
How Does It Work?
Just like I said above, this program helps you postpone your monthly payments for about 12 months. And after this period, you may decide to reapply if it is necessary. Although the lifetime maximum for general forbearance for Perkins loans is 3 years, the cumulative limits for federal loans depend on the servicer’s discretion.
Keep in mind that the guidelines for forgiveness for private student loans are different from those for federal loans. If you meet the requirements for this program and the request is approved by the lender or servicer, it will only be in effect for a short period of time. Depending on the type of loan you applied for, your servicer or lender, your reason, and your access to the student loan forebearance,
Types of Forbearance
Depending on your situation and the type of loan you have, the types of forbearance that may be available to you may vary. Here is what you need to know about your options:
When it comes to the federal student loan, there are two options that you may qualify for.
General Forbearance
This is made available for people who can make their federal loan payments because of difficult circumstances. This option is also called discretionary forbearance because the decision to reject or approve the request is totally at your servicer’s discretion.
Some of the reasons to ask for this option include income or employment changes, financial hardship, necessary and urgent bills, and other extenuating circumstances. This option provides borrowers with repayment relief, but it is made as a last resort option. If your loans qualify for this option, you can submit a request to your servicer. Note: If an urgent event causes you to miss a loan payment in the short term, call your loan servicer instantly and know the options that are available for you.
Mandatory Forbearance
Just as its name implies, this program requires your federal loan servicers to put your loan in forbearance if you qualify. If you have FEEL program loans or direct loans, you can have access to this option if:
- You get a nation-wide service award for serving a position with AmeriCorps.
- You are eligible for the Department of Defense Student Loan Repayment Program.
- You are in a dental or medical residency or internship.
- You’re an active member of the National Guard activated by the governor, but you are not eligible for a military deferment.
- If you are a teacher who is eligible for the Teacher Forgiveness program, And you want to reduce or pause your payment during your five-year service obligation.
- Your student’s monthly loan debt burden is more than 20% of your total gross income every month.
Private Student Loan Forbearance
Some private loan companies offer this option, while others do not. Generally, private lenders do not spell out their forebearance terms openly. Instead, they grant a payment pause, depending on the cause. As a result of this, you will have to call your private lender to learn about your options. However, just like I have stated above, a private lender will not offer the same generosity as the federal government.
Pros and Cons of Student Loan Forbearance
While this program offers borrowers much-needed relief, there are some advantages and setbacks you need to consider before submitting a request. Below are some of the pros and cons you need to keep in mind:
Pros;
- If you are experiencing a difficult financial situation, pausing your student loan payments can give you more room to provide for your personal needs.
- This program can help you avoid damaging your credit and entering default when you fall behind on your loan payments.
- It does not affect your credit negatively.
Cons
- Students with loans that are in default or delinquent are not qualified for this program.
- It is not a long-term solution. If your initial period ends, you will need to reapply, but there are caps.
- If your request does not fall under the mandatory forbearance, your service may deny or approve it after considering the situation you are in. Private lenders can also reject your requests at their deposition.
- If you want federal student loan forgiveness, the payment for this program won’t count towards the required payment amount for the forgiveness program.
How to Apply for Student Loan Forbearance
The application process for this program differs for private and federal loan borrowers. If you are a private student loan borrower, contact your lender to learn what your options are and how you can apply. However, with the federal loans, the process is more easy and straightforward.
- Know the type of forbearance you are eligible for.
- Download and fill out the specific type of form.
- Find documents that support your request.
- Submit the documentation and your request form to your federal loan servicer.
The servicer will review your documentation and decide if they should approve or deny your request based on the information provided.
Student Loan Forbearance Alternatives
If you have federal student loans, you’ve got a couple of choices instead of forbearance. These alternatives are deferment and income-driven repayment plans.
Deferment is a little bit similar to forbearance. You can pause payments, but the key part is that interest won’t stack up on subsidized loans. This makes it cheaper. However, if you’ve got unsubsidized loans, the interest accumulates during deferment, just like forbearance.
Income-driven plans are often the smartest options. Payments match your income, and whatever you pay will count toward the loan forgiveness program. If your income’s low, you might even get away with $0 monthly payments. And still be on track for loan forgiveness—unlike with deferment or forbearance.
For short-term troubles like job hiccups, health crises, or pandemics, forbearance might be the best option for you. But for long-term peace of mind, sticking with an income-driven plan is usually the right move.