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Editor’s note: In response to the coronavirus national emergency, interest rates on federally-held student loans have been reduced to 0% through Sept. 30, 2020, and borrowers have the option of suspending their payments for six months without accruing interest. During the temporary relief period, servicers who collect payments on federal student loans have been ordered to grant forbearance when requested, and the Department of Education has suspended “involuntary collection” on defaulted loans including garnishment of wages, tax returns or social security checks through Sept. 30.
If you temporarily can’t afford your student loan payments, forbearance may be a good option.
Forbearance is best if you:
- Can’t afford student loan payments
- Are facing a temporary financial setback
- Don’t qualify for deferment
When in forbearance, your payments are paused but interest still accrues. It’s okay for a short break, but can be costly over time.
In this post:
- How student loan forbearance works
- When student loan forbearance makes sense
- Pros of student loan forbearance
- Cons of student loan forbearance
- How student loan forbearance compares to other repayment plans
- How to apply for forbearance
- What to do if you don’t qualify for forbearance
How student loan forbearance works
Forbearance is a temporary break from student loan payments, but interest still accrues while you’re in forbearance. This makes it a less-ideal choice when you’re facing hardship and stress over making payments. But it’s a good option to avoid defaulting on your loan if you’re unable to pay.
There are a few different forbearance programs available for those with federal student loans, but they’re usually at the discretion of your loan servicer:
- General forbearance: This is common in between jobs, during medical treatment, and other temporary situations.
- Student Loan Debt Burden Forbearance: If the total amount you owe for monthly student loan payments is more than 20% of your income, you should look into getting a Student Loan Debt Burden Forbearance.
- Forbearance for teachers: Teachers also have a forbearance program available.
- Other forbearance programs: There are specific programs for those in medical or dental internships and residency, National Guard duty, and military service.
Forbearance typically lasts up to 12 months and you can reapply if you still need it when it expires or ever need it again in the future.
This temporary pause of payments does not directly harm your credit. However, the interest that accrues during forbearance is added to your balance when you resume payments. This capitalization leads to a higher balance and can slightly affect your credit score.
When student loan forbearance makes sense
Forbearance shouldn’t be looked at as a good way to avoid federal student loan payments. An income-driven repayment plan, deferment, or refinance may be better.
Here are some specific situations when forbearance may make sense:
- Layoff: You were laid off from a job and can’t make payments for a few months while finding a new one, forbearance could be the right choice.
- Major injury: If you were injured and have a lower income while on the mend, forbearance could be a helpful financial reprieve.
- High monthly payments: If your student loan payments are more than 20% of your gross income, an income-driven repayment plan is probably the best option. However, if the situation is temporary, forbearance is available as well.
- Taking care of a sick relative: If you’re taking a leave from work to take care of a sick relative for a short period of time, a forbearance could pause payments during the break.
- National Guard deployment: If you’re part of the National Guard and were sent to deal with a disaster for a short period, forbearance gives your family a temporary break from paying.
Pros of student loan forbearance
- Stop payments during financial difficulties
- Easy to apply via a simple form or sometimes by phone
- Works when other payment-relief programs are not an option
Cons of student loan forbearance
- Interest still accrues during the forbearance
- At the end of forbearance, interest is added to your loan balance
How student loan forbearance compares to other repayment plans
We’ve already mentioned that forbearance should be your last backup plan for dealing with struggles on your student loan payments. Here is a brief look at the other ways you can find relief.
| Term duration | Interest | Who qualifies | Affects credit score | |
|---|---|---|---|---|
| Forbearance | Up to 12 months at a time | Accrues during forbearance | Some borrowers (limited circumstances) | No |
| Deferment | Up to 36 months | May or may not accrue (depends on the type of loan) | Some borrowers (limited circumstances) | No |
| Income-driven repayment (IDR) | Life of loan as long as you qualify | Possible interest savings | Most borrowers | No |
How to apply for forbearance
To apply for forbearance using one of the federal government forms, follow these steps:
- Head to the government student aid website and download the appropriate form.
- Complete your forbearance form and gather any supporting documents if required.
- Contact your student loan servicer and submit your forbearance form.
- Continue with regular payments until forbearance is approved.
- If you need to continue after 12 months, reapply before your current forbearance term expires.
If you have any specific questions related to your loan accounts, call your loan servicer directly for assistance.
What to do if you don’t qualify for forbearance
If you’re rejected for forbearance, check out the income-driven repayment plans available to those with federal student loans. There are several programs that could all lower your payment even if it isn’t paused.
You can also look into refinancing your student loans if you have good to excellent credit.
Learn More: Student Loan Forbearance vs. Deferment
See Your Refinancing Options
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