What Is Student Loan Forbearance and Do I Qualify?
No matter where you are in life, unexpected circumstances may interfere with your ability to meet financial responsibilities like your student loans. If you’re having trouble making your student loan payments, you may be looking for a way to get some temporary relief. It’s important to know: You have options, opportunities, and second chances.
Whether you’re entering student loan repayment for the first time or facing financial challenges, student loan forbearance could be an option. If you’ve been wondering about the meaning of student loan forbearance, you can find the answers here. We’ll explain how it works, who qualifies, and whether it’s the right choice for you, so you can take your next steps with confidence.
What Does Student Loan Forbearance Mean?
Student loan forbearance is a temporary pause or reduction of your loan payments due to certain qualifying circumstances. It’s an arrangement students can make with their student loan company that gives them a little extra time to find their footing while overcoming financial hardships. Forbearance is typically available for both federal and private student loans. However, the meaning of forbearance may differ for private loans.
How Does Student Loan Forbearance Work?
Forbearance can be useful in situations where you’re struggling to make your student loan payments but expect your financial situation to improve. If you experience a job loss, medical emergency, or any other temporary hardship, forbearance allows you to stop or reduce your monthly payments for a limited period.
In most cases, you’ll have to request and apply for forbearance through your loan servicer (the organization you make your student loan payments to). If you have federal student loans, your servicer will provide an application form, and you may need to submit documentation showing financial hardship. The approval process depends on the type of forbearance you request. For private student loans, the process varies by lender.
In periods of student loan forbearance, you can sometimes choose to make interest-only payments to help lower your overall balance. Making small payments every month, even in times of forbearance, can help you pay off your loan sooner, but this isn’t always an option for every student. If you don’t do this, the unpaid interest will be added to your loan balance when forbearance ends, increasing the total amount you owe.
How Long Does Forbearance Last?
Once approved, the forbearance period for federal loans typically lasts up to 12 months. If you still need help after that, you may be able to request an extension, but federal loans have a limit of three years over the life of the loan.
Private lenders set their own rules, so the total length of forbearance varies. For students with Ascent’s college loans, you can apply for up to 24 months of Temporary Hardship Forbearance in 1 to 3-month increments.
Ascent also offers a Natural Disaster/Declared Emergency Forbearance, which allows students to pause payments for up to 3 months in times of natural disasters or global emergencies.
Understanding Forbearance vs. Deferment
Forbearance stops you from having to make monthly payments on your student loans. Student loan deferment also temporarily pauses your payments—the main difference is that deferment is offered only to students who choose this repayment option during the loan application process. Most commonly, if you elect to defer payments until after graduation, you won’t have to make payments on your private student loans while you’re in school, plus six additional months (also known as your grace period).
Student loan forbearance is only provided to eligible borrowers once they enter repayment. In some cases, students who apply for deferment may also qualify for forbearance in the future.
Interest may accrue during both periods of forbearance and deferment, depending on the type of loan you have and the lender who services your loan. In periods of deferment, you may accrue interest if you have:
- Direct unsubsidized loans
- Unsubsidized Federal Stafford loans
- Direct PLUS loans (Including Parent PLUS loans)
However, interest doesn’t accrue during your deferment on these loans:
- Direct subsidized loans
- Subsidized Stafford loans
Determining whether forbearance or deferment is right for you depends on your financial situation and the type of loan you borrowed. Keep in mind that you don’t have to make payments on your federal student loan if you’re attending school at least half-time or in certain specific cases. If you have federal loans, look into these options as well.
Types of Student Loan Forbearance
There are different types of forbearance available, depending on whether you have federal or private loans.
Federal Student Loan Forbearance
Federal student loans are serviced through various lenders, which is where you will apply for forbearance. Lenders have some leeway regarding the circumstances under which they grant forbearances and approve these requests on a case-by-case basis. However, most will grant general forbearance under the following circumstances:
- You have medical expenses.
- You’re experiencing financial difficulties.
- You’ve changed employers.
Mandatory Forbearance
Mandatory forbearance also applies to federal loans. Unlike general forbearance, your loan servicer must grant mandatory forbearance if you qualify and complete all the required documentation.
If you have direct federal loans, mandatory 12-month forbearances are granted if you’re part of the following programs or organizations:
- AmeriCorps
- Department of Defense student loan repayment program
- The National Guard
- A medical or dental internship/residency
You might also qualify for mandatory forbearance under the following circumstances:
- You’re a public school teacher that also qualifies for teacher loan forgiveness.
- Your monthly payments on your federal direct loans equal 20% or more of your gross income, in which case forbearance can be granted for up to 3 years.
After your mandatory 12-month forbearance is up, you can reapply to extend it. However, you must continue making payments until you’re notified that your application was accepted.
Private Student Loan Forbearance
Private student loan servicers’ terms differ from federal ones and can vary. Some private lenders offer forbearance programs similar to federal loans, allowing borrowers to pause payments for a few months. However, the eligibility requirements, length of time, and interest policies differ.
In some cases, lenders may only grant forbearance for extreme financial hardships, and interest rates can be higher than those for federal loans. Some lenders also charge fees for forbearance, which can add to the overall cost of your loan. If you’re considering this option, check with your lender to understand the specific terms.
Advantages and Disadvantages of Student Loan Forbearance
Student loan forbearance can pause your timeline for paying back a student loan, but it’s important to weigh the pros and cons before making a decision. One of the biggest advantages is that it prevents missed payments, which can help protect your credit score and keep your loan from going into default. It can temporarily take the weight of monthly loan payments off your shoulders while you stabilize your income to get back on track.
The downside is that although your payments are on hold during the forbearance period, interest will continue to accrue. That means you’ll have a larger loan balance when you have to start making payments again and your monthly payments may increase. If you use forbearance multiple times, you could end up paying much more over the life of the loan.
Alternatives to Forbearance
In addition to deferment (as mentioned above), there are alternatives to forbearance, such as:
- Student loan forgiveness: You qualify for the federal Public Service Loan Forgiveness (PSLF) plan if the government or a non-profit organization has employed you for ten straight years and you’ve made 120 qualifying payments during your employment period. At that point, your loans are forgiven. Your Direct Loans or FFEL Program loans can also be forgiven up to $17,500 if you’ve been teaching for five consecutive academic years at a low-income public school.
- Cancellation: You can cancel all or part of a student loan before it’s disbursed by notifying your school’s financial aid office. If it’s already been disbursed, you may still cancel it within a certain timeframe. Schools have different policies, so check with your financial aid office. Once cancelled, your school will return the funds to the loan servicer, and neither fees nor interest will be charged.
- Discharge: Rarely your school loan can be discharged outright. Your Direct Loan, FFEL Program Loan, or Perkins Loan can be forgiven if your school closes while you’re enrolled or shortly after you’ve graduated. Loans are also resolved if you become permanently and severely disabled or in the event of your death.
- Income-driven repayment plans: These plans adjust your monthly loan payments based on your income and family size. If you have federal student loans, an income-driven plan could lower your payments and extend your repayment period.
- Refinancing your loans: Refinancing your student loans could lower your interest rate and reduce your monthly payments. This is a good option for those with private loans or people who need a longer-term option. Some people with federal student loans even consolidate and then refinance them with private lenders, lowering their monthly payments and interest rates.
Deciding If Forbearance Is Right for You
Whether you’re in college or recently graduated with life experience behind you, managing student loans is something many people have to confront. Student loan forbearance can be a great way to get your finances together without the stress of making monthly payments by temporarily pausing your monthly payments.
Don’t let anything stand between you and a good education. If you’re considering paying for higher education with a private lender or looking to refinance your existing loans, check out what Ascent can offer. We have private loans for college students with generous forbearance and deferment options, in case you need them.
If you’re already in repayment and are considering either forbearance or deferment, reach out to a financial counselor at your school or your loan servicer to weigh the pros and cons. They’ll have the resources and experience to help you.
FAQ
Does Putting Student Loans in Forbearance Hurt Your Credit?
Forbearance itself doesn’t negatively affect your credit score because your loan remains in good standing. However, if you miss payments before your request is approved, that can hurt your credit. And because interest continues to build during forbearance, your loan balance and payments may increase, which could impact your overall financial health.
Is Forbearance the Same as Default?
No, student loan forbearance is a temporary pause or reduction in payments that prevents you from falling behind, while default occurs when you fail to make payments for an extended period. Defaulting on your student loans can have serious consequences, including damage to your credit score. Forbearance helps you avoid these risks.
