What Is Student Loan Forbearance?

Whether you’re still in school or out in the real world, you may come across the phrase “student loan forbearance” and feel lost and confused. In reality, student loan forbearance is a much simpler concept than it sounds. Read on to learn more about what student loan forbearance is and how it can benefit you.

Table of Contents

• 1. What is Student Loan Forbearance?
• 2. How Does Student Loan Forbearance Work?
• 3. Who is Eligible for Student Loan Forbearance?
• 4. Benefits of Student Loan Forbearance
• Q&A

1. What is Student Loan Forbearance?

Student loan forbearance is a process that allows borrowers to temporarily postpone or reduce their monthly payments due on a student loan. This can be done by simply reducing or suspending payments for a period of time, and the time will depend on the forbearance agreement.

When considering forbearance, it’s important to understand how it might affect you. Generally, it won’t reduce the total cost of your loan, but it can give you breathing room when you need it. Interest will continue to accrue during the period of the forbearance agreement, so your loan balance may end up being higher than before. Here are some of the most common reasons people consider student loan forbearance:

• Unemployment: You may be eligible for forbearance if you’re unemployed or struggling to meet monthly profits.
• Financial hardship: If you are facing high medical bills or other major expenses, an income-driven repayment plan may not provide enough relief.
• Military service: Being activated or deployed can make it difficult to keep up with payments.

2. How Does Student Loan Forbearance Work?

Student loan forbearance gives borrowers temporary relief from loan repayment. It is a great option for struggling students in difficult financial circumstances as it allows them to pause their loan payments while still in school.

The process of getting forbearance is relatively straightforward. First, you need to contact your lending institution and explain why you require the forbearance. If you are able to present an acceptable argument, your lender will usually grant the forbearance. It is important to note that your lenders may require additional information and documents prove your need for this type of relief. Once approved, you will usually be allowed to defer your loan payment for up to 12 months.

Once the forbearance period is over, you will need to resume your regular loan payments. Be aware that, even while your loan is in forbearance, the interest on your loan may continue to accumulate. This means that the loan balance will be slightly higher when the forbearance period ends.

3. Who is Eligible for Student Loan Forbearance?

Student loan forbearance is designed to help those who find themselves in a difficult financial situation. Borrowers can temporarily reduce/pause their payments with forbearance, while interest continues to accrue on the loan. But before taking steps towards loan forbearance, it’s important to understand who is eligible.

• Borrowers in financial hardship: If you can demonstrate a financial hardship, like loss of income, you may be eligible for forbearance.
• Borrowers facing health issues: People facing serious health issues (or those facing a critical illness in the family) may qualify.

In addition, different loan types may have different eligibility requirements for loan forbearance. For example, Direct Loans and FFEL Program Loans may require borrowers to demonstrate a partial financial hardship, while a Perkins Loan may have no such requirement.

4. Benefits of Student Loan Forbearance

For many students, student loans are a requirement of attending university. With that being said, there are many benefits of loan forbearance. Being eligible for forbearance can help an individual remain debt-free and provide a crucial financial lifeline during certain times.

Here are a few benefits of loan forbearance:

• The option to temporarily delay loan payments
• Interest continues to accrue, but you are not required to make payments until the end of the forbearance period
• Financial difficulties and hardships can be temporarily relieved
• Reduced stress and anxiety over financial circumstances

Loan forbearance does not merely benefit the student; it also benefits the lender. The lender is not required to take aggressive action against the student, so it is much easier to work with the borrower to prevent default. In this way, both parties can come to a mutual understanding and terms that are beneficial to their respective situations.

Q&A

Q: What is student loan forbearance?
A: Student loan forbearance is a financial aid program that allows borrowers to temporarily postpone or reduce their monthly loan payments due to a financial hardship or other extenuating circumstance.

Q: How does student loan forbearance work?
A: The borrower reaches out to their loan servicer to submit a request for student loan forbearance. Upon approval, their loan servicer will adjust their monthly payments for a set time frame, typically for less than 12 months. During the repayment duration, the borrower will not have to pay their scheduled monthly payments, but the interest accrued will continue to add to the outstanding balance.

Q: What are the requirements for student loan forbearance?
A: The borrower must submit a request to their loan servicers and provide documentation to support their financial hardship. Depending on the hardship, the loan servicer may ask for proof of income, employment, or a detailed financial statement.

Q: Are there any other options available besides student loan forbearance?
A: Yes, other options that may be available include a loan deferment, loan consolidation, or an income-based repayment plan. The borrower should check with their loan servicer and see what other options are available.

Ultimately, applying for student loan forbearance is a great option for individuals who are struggling financially and need some extra breathing room. Forbearance can be a major portion of getting back on track within student loan repayment — and with research and planning you can now make the best decision for job, budget and education goals.