If circumstances in your life have made it difficult for you to continue to make payments on your student loans, you may be able to stop or lower your monthly payments temporarily. The two ways to do this are through deferment or forbearance.
Deferment will temporarily halt your loan payments altogether, typically in periods of three months. It may be granted if you are returning to school, have an economic hardship, or are in active military service.
Forbearance is generally the second option after deferment and requires a direct application to be eligible. With forbearance, you can lower or stop your monthly loan payments for up to 12 months, although you will still be responsible for paying the interest during this time.
There are two types of forbearance: mandatory and general (often called discretionary). If you qualify for a mandatory forbearance, your lender must grant it to you. With a general forbearance, your lender decides if they will accept your request or not.
Both federal and private student loans may be eligible for forbearance.
If you are facing a hardship or event that is likely to be temporary, forbearance might help you catch up financially, but it should be viewed as a last-resort choice to avoid default on your student loans.
If your situation is not likely to change within a year, you might want to look at other repayment or loan forgiveness programs.
What Is Forbearance?
Deferment or forbearance can help you avoid missing payments on your student loans and, therefore, avoid defaulting. A default can negatively impact your credit score significantly, whereas a deferment or forbearance will not.
The main difference between deferment and forbearance is interest payments. With a deferment, students are not required to pay interest on their loan during the time period of the deferment. You can also be placed automatically into deferment when you enroll in school.
With forbearance, you will be responsible for paying the interest that accrues during your allotted period. You can apply for forbearance for up to 12 months. You can either continue to pay the interest each month during this time, or you can choose to accrue it and have it capitalized. This means that the accumulated interest will be added to your loan’s principal balance at the end of your forbearance period.
Again, forbearance can be granted as either general (or discretionary) forbearance or mandatory forbearance. General forbearances are at the discretion of your loan lender, while mandatory forbearances must be issued if you meet the eligibility requirements.
General or discretionary forbearance can be granted on federal direct loans, Perkins loans, FEEL loans, and some private loans. Your lender or student loan servicer decides whether or not you are eligible for a break in your loan payments.
If you meet any of the following requirements, you may be eligible for a general forbearance:
- You’ve had a change in employment.
- You have high medical expenses.
- You have extreme financial difficulties.
- Other life-changing events have impacted your finances and economic status.
General forbearances are granted for up to 12 months at a time. If your situation has not improved after 12 months, you can apply for another term.
There is no maximum amount of forbearance terms on direct or FEEL loans, but Perkins loans have a maximum of three 12-month forbearance terms.
Your private loan lender may have a maximum or lifetime amount of forbearance terms they allow. With discretionary forbearance, your loan lender decides whether or not you meet the terms of financial hardship and if you qualify for forbearance under their terms.
Most of the time, you will still need to apply for mandatory forbearance even though your lender is required to grant it to you. You may be eligible for a mandatory forbearance if any of the following are true:
- You are called into active-duty military service.
- You are serving in AmeriCorp.
- You are serving in a medical or dental residency program and meet specific eligibility requirements.
- You are serving a teaching commitment that may qualify you for teacher loan forgiveness.
- You are a member of the National Guard that has been activated by a governor.
- You qualify for a partial repayment program under the U.S. Department of Defense Student Loan Repayment Program.
- Your monthly loan payment is at least 20% more than your gross monthly income.
Just like with general forbearance, mandatory forbearance is granted in terms of up to 12 months. If you still qualify after your first 12 months is up, you can apply for another term.
Applying for Forbearance
To apply for forbearance, you will need to meet all eligibility criteria set forth by your lender. If you have a private student loan lender, you will need to contact them directly to determine if and how you can apply for a forbearance.
If you have federal student loans, you can use the following links to find information on applying:
- General forbearance
- Mandatory forbearance for National Guard service, medical or dental residency, or repayment programs
- Mandatory forbearance for student debt burden
- Americorp forbearance
- Teacher Loan Forgiveness Program forbearance
Pros and Cons of Forbearance
While a forbearance note will appear in your credit report, it should not impact your credit score. On the other hand, late or missed payments and loan default will drop your credit rating drastically.
If you are struggling to make ends meet and need a little more time to get back on your feet, forbearance might be a good option if your situation is temporary.
During forbearance, you have the option to pause your monthly payments or continue to make smaller payments that are more affordable. Either way, the money you owe will continue to accrue interest. If you allow your interest to accrue and capitalize instead of paying on it during your forbearance period, you will end up paying more money on your loan overall.
If your financial situation is unlikely to improve in 12 months, you might want to consider other options. Income-driven repayment plans offer flexible options that take your income and family size into account. They cater your monthly payments to your circumstances to make them more manageable.
You may also be eligible for loan forgiveness programs, such as the Public Service Loan Forgiveness Program or the Teacher Loan Forgiveness Program. If you complete a term of service, your federal student loans can be forgiven.
Private student loan lenders are stricter with loan forbearance terms. Often, they won’t adjust loan payments as easily.
Loan forbearance should be the last course of action. First, consider other ways to alter your repayment options, such as loan forgiveness programs or deferment.