What Is Student Loan Forbearance?

Written by Scott Benjamin

September 13, 2021

With the price of college rising exponentially in the United States, inevitably it increases the amount of student loans that each college student takes out to help pay for their education. Student loans can take up to thirty years to pay off or twenty-five years if the student is enrolled in an income-driven repayment plan. If an accident or emergency happens, the borrower’s income can take a major hit and be unable to make their student loan payments. This is where student loan forbearance comes in.

Student loan forbearance is a program that allows you to suspend or lower your student loans payment during a period of financial hardship. Forbearance should not be confused with deferment. Deferment allows you to not pay interest that would accrue on your loans while forbearance makes you responsible for accrued interest during the forbearance period. You do have the option to pay the interest as it accrues or wait until the end of the forbearance period for the interest to be added to the principal balance. Federal student loan servicers and private student loan servicers can both offer forbearance.

There are two types of forbearance, general and mandatory. General forbearance is when your loan servicer chooses to grant a request that was submitted for forbearance. You are allowed to request forbearance if you are experiencing financial difficulties, high medical expenses, and changes in employment that make you unable to make your student loan payments. General forbearance is available for direct federal loans, federal family education program loans, and Perkins loans. The typical forbearance period is 12 months. If you are still experiencing one of these eligible issues above, you can request another forbearance.

Mandatory forbearance requires your loan servicer to grant you forbearance. The eligibility requirements are not based on financial hardship, but other circumstances. Some of the approved circumstances include serving in an AmeriCorps position where you received a national service award, you qualify for partial repayment under the Department of Student Loan Repayment Program, you are participating in a medical or dental internship or residency, and you are a member of the National Guard and have been activated. The duration of a mandatory forbearance cannot last longer than 12 months. If you continue to meet the requirements, you can request another forbearance.

To request a forbearance, you must submit a form to your student loan servicer. Sometimes you must provide documentation showing you meet the requirements for the forbearance.

A few positives of student loan forbearance are, that it is a better option than defaulting on your loan by not making payments, you are allowed to not pay so you can pay off critical expenses, and forbearance does not have an impact on your credit score. While these are nice, forbearance is not a long-term solution. If you continue to renew your forbearance, you can end up defaulting on the loan. Loan default can severely damage your credit score.

Forbearance is a good option if you need temporary relief from your payments due to financial hardship. Unfortunately, forbearance does not make your loans go away. Reach out to us at Firethorn Wealth if you are interested in discussing the best options for your student loan repayment considering your financial situation.