If you’re having trouble making payments and you expect it to only last for a short time, student loan forbearance might be a good option to consider. With forbearance, you can postpone or reduce your payments temporarily, giving you time to catch up on your finances.
In mid-2019, the Department of Education released a report showing that more than 2.6 million borrowers were currently in forbearance. Compared to the number of student loans in active repayment (18.5M), this number demonstrates how many borrowers are having trouble repaying their loans.
If you’re someone who is struggling financially and you’re running out of ways to come up with your monthly loan payments, student loan forbearance might help! By qualifying for forbearance, you can put your payments on hold long enough to resume payments once your financial situation improves.
What is Student Loan Forbearance?
Forbearance is a program offered by the Department of Education that allows you to suspend or lower your student loan payments temporarily by meeting certain requirements. Except for Perkins Loans, which offer a maximum of three years of forbearance, you can request forbearance on your student loans as many times as you wish, as long as you remain eligible.
While there are no specific limits to how long you can use forbearance to postpone your student loans, most servicers will give you 12 months to restart the payment process. Of course, how long you can use forbearance will depend on your individual circumstances.
Loans that qualify for forbearance include Direct Loans, FFEL Program Loans and Perkins Loans.
Types of Student Loan Forbearance
The Department of Education has designated two types of forbearance available to borrowers: General Forbearance and Mandatory Forbearance. Here’s how these two options are different from each other.
General Forbearance lets your servicer decide if you qualify for the program, giving them discretionary control over your approval. General Forbearance is typically approved when you’re experiencing:
- A financial hardship
- Unexpected or large medical expenses
- Job loss or a change in employment status
- Other qualifying reasons decided by your servicer
Your servicer can offer forbearance for up to 12 months at a time on Direct, FFEL Program and Perkins Loans. You can also apply for forbearance as often as you wish; however, you can only have Perkins Loans in forbearance for up to three years total, and your servicer may limit the maximum period you can have other loans in forbearance.
Mandatory Forbearance requires your servicer to provide forbearance on your loans for up to 12 months at a time as long as you’re eligible. When the 12-month period ends, you can request additional time for Mandatory Forbearance by continuing to meet the program’s requirements.
Qualifying reasons for Mandatory Forbearance include:
- You have Direct or FFEL Program Loans and serve in a medical or dental internship or residency program
- Your total federal student debt on Direct, FFEL Program and Perkins Loans exceeds 20 percent of your gross monthly income
- You have Direct or FFEL Program Loans, serve in AmeriCorps and have received a national service award
- You have Direct or FFEL Program Loans and work in a teaching position that qualifies you for Teacher Loan Forgiveness
- You have Direct and FFEL Program Loans and qualify for partial repayment of your loans through the U.S. Department of Defense Student Loan Repayment Program
- You have Direct and FFEL Program Loans and are an activated member of the National Guard not eligible for military deferment
How to Request a Student Loan Forbearance
Unless your servicer automatically approves you for Mandatory Forbearance, you’ll need to submit an application in order to get approved. This application requires you to provide information that demonstrates your eligibility. Additionally, the application gives you the option to choose between lower or postponed payments, as well as the dates you’d like the forbearance to start and be completed.
Once your servicer has received your application, they will notify you if you have been approved for forbearance, and let you know how long you’ve been approved for.
How Forbearance Affects Your Student Loans
When your loans are in forbearance, you won’t be required to make monthly payments until the forbearance period has ended. However, unlike student loan deferment, you will still be responsible for any interest that accrues during this period.
During forbearance, interest continues to build each month on Direct and FFEL Program Loans, and is added to your balance when the forbearance period has ended. So, while your repayment period may be extended through forbearance, you will end up paying more as a result.
One way around this is to make interest-only payments while your loans are in forbearance. Doing so, you can avoid having extra payments tacked on to your existing loans, and get out of debt more quickly.
Is Forbearance Right for You?
Forbearance may be a great option for a temporary financial problem. If you only plan on having difficulty making payments for up to a year, forbearance can provide some measure of relief. However, you might look into other options, such as student loan deferment, instead.
Are your monthly payments simply unaffordable? You do have other options. As a federal student loan borrower, there are a number of income-driven repayment programs that can help you reduce your monthly payments and give you more time to repay your loans. These include:
- Income-Based Repayment (IBR) Plan
- Income-Contingent Repayment (ICR) Plan
- Pay As You Earn (PAYE) Plan
- Revised Pay As You Earn (REPAYE) Plan
Payments through these programs are capped based on your discretionary income, which takes into account your annual income and family size. In some cases, your payment under these programs could be as little as $0 a month. Additionally, these programs give you access to loan forgiveness programs offered by the DOE that could eliminate your debt entirely.