Q: What is forbearance on a student loan?

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A forbearance for federal student loans stops payments for a short period of time. Forbearance occurs when:

  • student loan payments are temporarily suspended
  • payment dates are extended or
  • payments for less than are agreed are accepted.

The Department of Education will grant a forbearance request when two things are true:

  • you intend to repay the loan and
  • you provide sufficient documentation to support your request

Related: Q: How do I get a student loan deferment?

Private student loan forbearance

Private student loan forbearance options vary from lender to lender. Typically, the loan servicer for your private loan will apply a forbearance when:

  • you're attending school at least half-time or
  • you're facing some type of economic hardship/financial difficulty.

Sometimes the forbearance they'll apply will suspend your payment entirely. Other times, it will cause you to make a partial repayment. Get clarity from your loan servicer as to which forbearance was applied to your loan.

Is it bad to get a forbearance on a student loan?

At the end of most federal student loan forbearances, the unpaid interest will be added to your principal balance. Depending on your interest rate, this will cause your loan balance to increase drastically. Forbearance will not, however, hurt your credit score. A forbearance will show on your credit report as $0 payment due to forbearance.

Coronavirus and Student Loan Forbearance

Due to the coronavirus outbreak, President Trump has ordered interest that accrues on federal student loan payments be waived.

How long will the waiver last?

Who knows.

The waiver plan is still developing.

Regardless of whether interest is waived, I believe it’s paramount you keep making your monthly payments during this social distancing period. This is especially true if you’re working towards loan forgiveness under the Public Service Loan Forgiveness program.

Forbearance Increases Your Loan Balance

When you’re in forbearance, all the payments that were supposed to be made will be added to your principal balance. The process of adding the interest to your federal loan balance is called capitalization.

The Types of Forbearance

There are two categories of forgiveness for Direct Loans:

  1. Forbearance you request (voluntary forbearance)
  2. Forbearance directed by the Department of Education (administrative forbearance)

Let’s discuss each.

Voluntary Forbearance

You can request forbearance when:

  1. You can show that medical reasons/medical expenses that are causing you financial difficulties
  2. You’re in a medical residency program or dental internship
  3. You’re eligible for the teacher loan forgiveness program
  4. You’re a member of the National Guard or Americorps
  5. You’re bringing your loan current after being in default status

This is just some of the reasons why you can request a forbearance. You can read the complete list at 34 CFR 685.205(a).

Administrative Forbearance

The federal government can place your loans in forbearance when:

  1. You were granted a deferment you weren’t qualified to receive
  2. You’re past due on payments before entering a deferment or forbearance
  3. You file bankruptcy
  4. You become totally and permanently disabled or die
  5. You applied for discharge under certain programs
  6. The Department of Education authorizes forbearance due to a local or national emergency (depending on the forbearance period, interest may not be capitalized)
  7. You change repayment plans or consolidate your loans (interest does not capitalize during this forbearance)

There are other times when you can be placed in administrative forbearance. You can read the complete list at 34 CFR 685.205(b).

Forbearance and Public Service Loan Forgiveness

You don’t get credit towards the 120 monthly payments you need to make under the PSLF program when you’re in forbearance.

So if you’re trying to get your loans forgiven quickly, accept forbearances only when necessary.

If you can’t afford your monthly payment, check with your loan servicer to see if you can get a lower monthly payment based on your current income and family size.

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I'm a student loan lawyer that helps people like you with their federal and private student loans wherever they live.

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