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The Ultimate Guide to Forbearance for Student Loans

What would you do if you lost your job and had no source of income to make your student loan payments? If you’d be totally lost as to what to do, you’re in the right place to learn about your options. 

We covered what deferment is in our last blog; now, let’s talk about forbearance. What sets forbearance apart from deferment? We’ll break down what it entails, who qualifies for it, and how it can help borrowers manage their loans. 

What is Forbearance? 

Forbearance will pause payments for a certain amount of time or allow for smaller loan payments. During these periods, interest will accrue on all loans. Once forbearance ends, the accrued interest will be part of the total loan amount and will be paid off through monthly payments. On the other hand, deferment does not accrue interest on certain loan types, meaning you won’t have to pay back any or as much interest as you would in forbearance. 

Borrowers are permitted to request forbearance for up to 12 months initially. If they require additional time beyond this period, they must submit another request. However, there is a cumulative cap of three years when it comes to general forbearance. 

There are two common types of forbearance: General and Mandatory. The distinction lies in the borrower’s circumstances. Additionally, loans through the Federal Family Education Loan (FFEL) program may be eligible for mandatory forbearance. 

Reasons for Seeking Payment Pause

To qualify for general forbearance, the borrower must have specific reasons. The reasons can be:  

  • Financial difficulties 
  • Medical expenses 
  • Change in employment 
  • Other reasons acceptable to your loan servicer 

Student loan borrower unable to afford medical bill and will need to apply for forbearance

There is also mandatory forbearance, during which your loan servicer is obligated to grant you forbearance. Borrowers will be eligible for a mandatory payment pause if they are in the following circumstances: 

  • AmeriCorps 
  • Department of Defense Student Loan Repayment Program 
  • Medical or Dental Internship or Residency 
  • National Guard Duty 
  • Student Loan Debt Burden 
  • Teacher Loan Forgiveness 

Learn more about each circumstance here. 

Pros and Cons 

Forbearance can provide temporary financial relief for student loans, allowing them time to focus on important priorities such as residency or finding a higher-paying job. With forbearance, you can avoid default, a situation which all borrowers should strive to prevent due to its potentially damaging consequences. 

Coins increasing overtime as a metaphor for interest accruing over time.

Although forbearance has some pros, there are also cons that are important to consider. Despite borrowers not making payments, interest will still accrue on their loans, resulting in a higher overall loan amount, which means your monthly payment is likely to increase once the forbearance ends. In cases where borrowers don’t qualify for mandatory forbearance, they will need to persuade their lender to pause payments under general forbearance. Moreover, forbearance can only be used for a limited amount of time, so borrowers should use it wisely and only when they truly need it. 

How to Apply  

To apply for forbearance, the borrower should determine the type for which they qualify and complete the corresponding form. They also need to include any additional documents that show proof of eligibility. The form and documents should then be sent to their federal student loan servicer. 

Required forms for General and Mandatory Forbearance:

General form:   

General form

Mandatory forms:  

AmeriCorps

Department of Defense Student Loan Repayment Program

Medical or Dental Internship or Residency

National Guard Duty

Student Loan Debt Burden

Teacher Loan Forgiveness

Understanding Pausing Payments and Beyond 

While pausing payments can provide temporary relief from making payments, it’s crucial to recognize its potential long-term consequences. The first choice should always be to compare repayment plans, then consider deferment, and lastly forbearance. Before making any decisions, borrowers should always do their own research and carefully consider their options. Read about our previous blog on deferment and understand the types of payment pauses.

Need Guidance?

Contact our compliance team!

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