Monthly student loan payments are a big chunk of many borrowers’ budgets. That can make it hard to save for short-term emergencies like medical bills or car repairs.
If you don’t have savings to dip into when unexpected expenses crop up, student loan forbearance could be an option. Forbearance lets you temporarily pause your student loan payment so you can use your hard-earned money for other things.
That can be a huge relief for borrowers living paycheck-to-paycheck. But forbearance is only a temporary solution and has some consequences. So understand what you’re getting into and carefully weigh your options before making this move.
What Is Student Loan Forbearance?
Student loan forbearance allows you to temporarily pause your monthly student loan payments, usually for 12 months or less. You can get forbearance during times of financial stress, such as a period of unemployment, reduced income, or illness. You can also get it if you’re participating in a program like AmeriCorps or are deployed in the National Guard.
On federal loans, forbearance is less desirable than deferment because interest accrues, whereas you can defer subsidized federal or Perkins loans without worrying about that.
But if you have private student loans, interest accrues whether your payment pause is called a deferment or forbearance.
Further, once the forbearance period ends, any accrued interest capitalizes. That means it becomes part of the principal balance. Thus, at the end of the forbearance, interest starts accruing on top of the new higher balance. In other words, you’ll be earning interest on top of interest.
That’s true of both private and most federal loans. Perkins loans are the only exception. If you have a Perkins loan, interest accrues during the forbearance, but it’s not capitalized at the end.
To avoid interest capitalization on your other loans, you can pay the interest during the forbearance if you’re able.
Types of Student Loan Forbearance
Forbearance is available on all federal student loans and most private student loans. But it works very differently depending on which type you have.
Federal Student Loan Forbearance
If you’re having trouble making payments on your federal student loans and don’t qualify for deferment, you can request a forbearance from your student loan servicer, the company the government assigns to administer your loan.
All types of loans are eligible, including federal direct loans (subsidized and unsubsidized loans, PLUS loans, and consolidation loans), FFEL loans (federal family education loans), and Perkins loans.
There are three types of forbearance: general, mandatory, and administrative.
General Forbearance
The loan servicer grants general forbearance, sometimes referred to as discretionary forbearance, at its own discretion. You can request a general forbearance for several reasons:
- You’re experiencing financial hardship.
- You have excessive medical expenses.
- You’ve experienced a change in employment.
- You’re experiencing any other circumstance that makes it temporarily difficult to repay your loan, which your servicer accepts as a reason to grant the forbearance.
Because general forbearance is at the discretion of your loan servicer, it’s ultimately up to them whether to grant it. However, servicers have a lot of leeway, meaning they can grant you a temporary suspension of payments for nearly any reason as long as it seems reasonable.
You can receive a general forbearance for 12 months at a time. At the end of 12 months, if you’re still experiencing financial hardship, you can request another forbearance.
However, you can’t forbear your loans under a general forbearance for more than three years in total.
Mandatory Forbearance
Unlike general forbearance, your servicer must grant you a mandatory forbearance if you qualify and apply for it.
Servicers grant mandatory forbearances for those who meet specific qualifications.
- You’re serving in an AmeriCorps volunteer position for which you’ve received a national service award.
- The total student loan debt you owe each month on all your federal student loans exceeds 20% of your monthly gross income.
- You’re serving in a medical or dental residency.
- You’re a member of the National Guard and have been activated by the governor but don’t qualify for military service deferment.
- You qualify for partial repayment of your student loans through the United States Department of Defense’s student loan repayment program.
- You’re working toward qualifying for teacher loan forgiveness.
Like general forbearances, you can receive mandatory forbearances for up to 12 months at a time. At the end of 12 months, you can request another forbearance as long as you continue to meet the eligibility requirements.
Unlike general forbearance, there’s no cumulative limit on most mandatory forbearances. The exception is the student loan debt burden forbearance, which you can only receive up to a cumulative maximum of three years.
Administrative Forbearance
If you’re applying for a repayment plan, such as an income-driven repayment plan, or to have your student loans consolidated, it can sometimes take up to 30 days to process your application.
So the servicer may place your loans in administrative forbearance. That prevents you from having to keep paying your student loan bills until your new payments start.
Private Student Loan Forbearance
Most private lenders also offer forbearance. But theirs is similar to a deferment, as neither option defers interest. Thus, the difference is primarily in the name.
Nevertheless, it’s worthwhile to know the option exists. And it’s similarly worth it to check your loan’s paperwork to see if your lender makes any distinction in terms. Occasionally, there are minor differences.
For example, a lender may require a specific application and term length for a financial hardship deferment. But if you need to pause payments further, an additional financial hardship forbearance may be available at the lender’s discretion.
Another difference is that forbearance options are usually for much shorter term lengths than federal student loans.
Typically, private lenders grant forbearances for two to three months at a time, up to 12 months total. And sometimes, there’s a fee. But it varies by lender.
Additionally, your options for forbearance are less flexible than with federal student loans. For example, there’s no such thing as a mandatory forbearance on private student loans.
Advantages and Disadvantages
Student loan forbearance can be useful if you have a truly temporary hardship and don’t qualify for a deferment on your federal student loans. But it can be an expensive move on both federal and private student loans.
Advantages of Student Loan Forbearance
- It Gives You Temporary Relief. Briefly pausing your student loan payments can free you up to pay critical expenses in the short term.
- It Racks Up Less Interest Than a Personal Loan. Even though interest accrues on your loans, if pausing your monthly payment enables you to avoid taking out a loan to pay essential expenses, you could pay less interest overall than you would on a personal loan, which typically has a higher interest rate.
- It Has No Impact on Your Credit Score. A missed payment negatively impacts your credit score, but loans placed on forbearance do not.
- It’s Better Than Default. If you fall behind on your student loan payments, you could be in danger of defaulting. Asking for forbearance prevents that from happening.
Disadvantages of Student Loan Forbearance
- It’s a Poor Long-Term Solution. If your hardship is long term, there are better solutions than forbearance, such as income-driven repayment.
- Interest Accrues on all Student Loans. Interest accrues on all but Perkins loans during a forbearance. So the longer you forbear, the more you owe.
- Interest Capitalizes at the End of the Forbearance. When interest capitalizes, your balance is even higher and you start racking up interest on the new higher balance, meaning you’re now paying interest on top of interest. Thus, it exponentially increases the amount you have to repay.
- You Won’t Make Any Progress Toward Forgiveness. Loans in forbearance don’t earn credit toward public service loan forgiveness or the standard student loan forgiveness that comes at the end of an income-driven plan. (Private loans aren’t eligible for forgiveness.)
- You Won’t Make Progress Toward Paying Back Your Loans. Multiple years of deferments and forbearances can easily cause a manageable amount of student loan debt to spiral into an overwhelming debt burden. Accruing interest and capitalization can cause the debt to balloon to an unmanageable amount.
Student Loan Forbearance FAQs
If you still have questions about student loan forbearance, you’re not alone. These are the most common questions people ask about it.
Who Should Use Student Loan Forbearance?
You should only opt for a forbearance when you’re facing a short, one-time financial crisis, such as when you need extra money for a home or auto repair or when you’re facing a considerable medical expense.
Before opting for a forbearance, check first to see if you qualify for a deferment since it’s more favorable for federal student loan borrowers.
But look into it if you have private student loans too. Even though the differences tend to be in name only, it’s worth checking with your lender to see if minor differences make one more favorable.
And if it’s manageable for you, pay any interest that accumulates on your loans during the forbearance. That keeps it from capitalizing and making a tough financial situation even worse.
Does the COVID-19 Loan Payment Pause Affect Forbearance?
There’s no need to forbear your federal student loans during the federal payment pause. Since the government suspended payment on all federal student loans at 0% interest, no one has been required to make payments and no interest has accumulated on any federal student loans — subsidized or otherwise — since March 2020.
The Biden administration announced the pause will end on Aug 31, 2022. Though the administration has extended the pause several times, don’t count on another extension. Instead, plan for interest to begin racking up at that time.
After that date, if you need a short pause on payments, forbearance is an option. Also note that if you miss a payment right after the student loan pause restarts, you have a short grace period — up to 90 days — to become current.
Just call your servicer, and they can apply a forbearance retroactively. But after the 90 days are up, your delinquency will be reported to the major credit bureaus.
See StudentAid.gov for more information on the COVID-19 federal student loan payment pause.
The federal student loan payment pause has had no effect on private student loan borrowers, as the federal government has no authority over private student loans.
However, some private lenders are offering borrowers who are affected by COVID-19 various relief options, such as temporary forbearance or modified payment plans. Check with your lender to see if they can provide any relief. If not, look into refinancing with a lender that offers better terms.
How Do I Apply for Forbearance?
While there is an online form for requesting a general forbearance on federal student loans, you can also apply by simply calling your servicer and asking over the phone.
To apply for a mandatory forbearance, you must complete the appropriate application for the forbearance type you’re requesting. You must also submit the required documentation (as requested on the form). There are separate forms for:
- AmeriCorps
- Student loan debt burden (monthly total of all payments exceeds 20% of your income)
- Medical or dental residency
- National Guard duty
- Department of Defense Loan Repayment Assistance Program
- Teacher loan forgiveness
The private loan forbearance application process varies by lender. But typically, you apply online or call your lender.
How Long Does Forbearance Last?
Forbearance on federal student loans can last for between one and 12 months. At the end of 12 months, if you still need to forbear your loans, you can request additional time. You can request up to 12 months at a time, up to three years total.
However, if you need to pause payments for this long, there are better alternatives than forbearance, such as income-driven repayment.
For private student loans, it varies by lender. Few lenders allow as much as three years of forbearance. Most allow only a few months at a time, up to 12 months total.
Will Forbearance Affect My Credit Score?
Although a forbearance shows on your credit report, it doesn’t impact your credit score. But missed or late payments do. So if you’re in danger of missing a payment, contact your servicer or lender well in advance of the due date to request a forbearance.
That said, what does affect your credit score is your total amount of student loan debt, which influences your debt-to-income ratio. Thus, the higher loan balance following forbearance could potentially lower your score.
Also note that during forbearance, your credit report shows the monthly payment as the standard amount due on a 10-year repayment schedule. That’s significantly higher for many borrowers than what they’d pay on an income-driven or other extended repayment plan.
And that affects your ability to qualify for new credit, as your monthly payment amount matters more than your total debt whether or not you’re making the payment.
Several years ago, I was unable to qualify for a car loan because my credit report showed a monthly student loan payment of thousands of dollars. But the loans were in deferment, which works similarly.
What Can I Do if I Don’t Qualify for Forbearance?
Federal student loan servicers have a lot of leeway to work with you to find a payment plan that fits your budget, whether that means an income-driven plan or something with an even lower payment. If you explain your situation, they can find a way to help you avoid default.
Unfortunately, you don’t have as much recourse with private student loans. Some lenders have alternative payment options, but the law doesn’t require them to give you the same options you would have on federal student loans.
If your lender doesn’t offer an option that works for you, you may have no choice but to attempt to settle your student loans or get them discharged in bankruptcy.
It happened to me when I went through a brief period of unemployment. My private lender wouldn’t allow me to forbear my loans. Since I couldn’t pay the bill, I had to default and look into student loan debt settlement. There was no other option.
But never default on purpose. Often called “strategic default,” the goal is to force your lender to settle. But it’s technically a form of fraud. Beyond that, you risk getting sued, which could result in a court order to have your wages garnished. And you may never get the settlement you intended.
Whether you’re facing financial difficulty repaying federal or private student loans, you can also seek help from a student loan resource center like the Institute of Student Loan Advisors, which provides free advice to student borrowers.
Or speak with a financial advisor who can help you navigate the world of student loans as well as your complete personal financial picture. You can find a certified student loan counselor at the nonprofit National Foundation for Credit Counseling.
Alternatively, seek an attorney experienced in the nuances of student loans. They can advise you on what to do when you can’t pay them.
To find a student loan-qualified lawyer, try one of these resources:
- The National Association of Consumer Advocates
- The American Bar Association
- Legal Services Corporation
Alternatives to Student Loan Forbearance
A forbearance can provide temporary breathing room if you have a short-term financial need. But it’s costly if you try to use it as a long-term solution. Instead, investigate one of these alternatives.
1. Deferment
Like forbearance, deferment lets you pause payments temporarily. But federal student loan deferment is superior to forbearance because it suspends interest on federal direct subsidized loans and Perkins loans. Thus, all you owe at the end of a deferment is the original loan amount.
However, it still has some of the same disadvantages of forbearance, including a lack of interest suspension on unsubsidized loans and not counting toward loan forgiveness.
Note with private student loans, deferment and forbearance essentially mean the same thing, so the advantages and disadvantages are practically identical.
2. Repayment Plans
If you’re facing a long-term hardship, you’re better off choosing a repayment plan that lets you make progress on your loans. Both the government and most private lenders have payment plans that could help you repay your loans faster rather than merely postponing them.
Federal income-driven repayment plans are superior to forbearance because you continue to make progress toward forgiveness, even if your payment is $0. And private lenders may let you make reduced or interest-only payments, so even if you’re not paying down your principal, at least you’re not racking up extra debt.
3. Loan Forgiveness
If you enroll federal student loans in an income-driven plan, the government forgives any remaining balance after 20 to 25 years of income-based repayments (depending on your plan) under its standard student loan forgiveness plan. If you qualify for public service loan forgiveness, you only have to pay for 10 years.
However, time spent in forbearance doesn’t count toward forgiveness, and no private lender offers it.
Final Word
As with most things, student loan forbearance has advantages and disadvantages. But default comes with severe consequences like long-term damage to your credit score, wage garnishment, or tax refund or Social Security benefit seizure. So forbearance is definitely the better option.
That said, student loan forbearance should always be a last resort, never the first option. Further, it’s a temporary way to stop making payments, not a long-term strategy to make your loans more affordable or delay making payments indefinitely. So only use it if you need temporary relief to avoid default.
If you’re worried about affording your federal student loans over the long run, opt for an income-driven plan instead.
