A student loan forbearance lets you temporarily stop making your payments or reduces the amount of the installments for a time. If you find yourself unemployed, underemployed, or otherwise struggling to keep up, contact your lender to see if you’re eligible. For some types of forbearance, an application is required, but for other types, a verbal request is enough. You should only use a forbearance if you absolutely must because it may disqualify you for certain loan benefits, like rate reductions for regular on-time payments.
Forbearance vs. Deferment
The terms forbearance and deferment are sometimes used interchangeably, though the two are actually different. In a deferment arrangement, your payments are on hold and depending on the loan type, you may not have to pay the interest on your loans during that time.
With a forbearance, the interest accrues throughout the forbearance period, regardless of what type of loan you have. You can choose to pay it as it adds up, or you can capitalize it. That means you let it accrue without paying during the forbearance and add it to the principal once you come out of the forbearance. Capitalization is not available on Perkins loans, and though it is more convenient in the short-term, it usually means you’ll pay more over the life of the loan.
Regardless of whether you are applying for forbearance or deferment, it’s important to keep making your payments until you get the official word from your lender that your application is approved. If you stop making the payments before you get the approval, your loan goes into default, and that’s bad for your credit.
Two Types of Forbearance
There are two types of forbearance, general and mandatory.
1. A general forbearance is granted by your lender, so it’s sometimes called a discretionary forbearance. You can apply for this type of accommodation if you’re having financial difficulties like large medical bills, are experiencing a job change, or for other reasons that your loan service company can accept at its discretion.
A general forbearance is granted for 12 months at a time, and some loan types limit the number of forbearance requests they’ll accept. Perkins loans, for example, have a cumulative cap of three years of forbearance. For that reason, most lenders recommend using a general forbearance as a last resort and only if deferment is not an option. You should also consider changing your payment plan. For more details, check out the General Forbearance Application.
2. If you meet any of these conditions for a mandatory forbearance, your loan service company must grant it. This type of forbearance lasts for no more than 12 months at a time. You can ask for another if you are still eligible at the end of the first forbearance. Some qualifying situations include:
- If you are in a medical or dental internship or residency and meet other requirements specific to your loan type; available only with direct student loans.
- If the amount you owe on all your loans is 20 percent or more of your monthly gross income for up to three years; available with Direct and Perkins Loans.
- If you are serving with AmeriCorps and receive a national service award; available with Direct loans.
- If you are teaching in a position that qualifies for teacher loan forgiveness; available with Direct loans.
- If you qualify for partial repayment under the U.S. Department of Defense program; available with Direct loans.
- If you are a member of the National Guard activated by a governor but not eligible for military deferment; available with Direct loans.
Is a Forbearance Right for Me?
Forbearance is a tool to help you avoid defaulting on your loans, which damages your credit and can interfere with your life plan. If you’re having trouble paying your loans because of a temporary condition, then forbearance might be the solution.
However, if the circumstances seem more permanent, or you have no idea when things might change, then you may need to change your payment plan or consider a deferment instead. The most important thing is communicating with your loan service provider as soon as you know you’re having difficulty. They can walk you through your options step by step.
As your forbearance comes to an end, if you don’t plan to apply for another one, you’ll select a new repayment plan to get back on track. Remember that you should get back to repayment as soon as you can, even if you have time left on your forbearance because the interest is still adding up.