You might have heard the term forbearance used in relation to student loans , but what does it actually mean? In this blog post, we’ll explore forbearance in detail and provide some examples to help you better understand this student loan concept.
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When you can’t make your student loan payment, you have several options. One option is forbearance. Forbearance allows you to temporarily stop making payments or to make smaller payments than you normally would. There are two types of forbearance: mandatory and discretionary.
What is Forbearance?
Forbearance is a temporary postponement or reduction of payments on a loan. Forbear means to hold back or refrain from doing something. When you forbear on your student loans, you’re asking your lender to agree not to force you to make payments on your loan for a period of time.
Forbearance can be granted for several reasons. The most common are:
What are the Different Types of Forbearance?
There are two types of forbearance: mandatory and discretionary. Your lender must give you a mandatory forbearance if you meet certain criteria, such as being a member of the National Guard or Reserve called to active duty, or being a Peace Corps or AmeriCorps volunteer. Discretionary forbearances must be approved by your lender and can be granted for reasons such as financial hardship or illness.
If you’re struggling to make your student loan payments, you might be able to get a forbearance on your loans. A forbearance allows you to temporarily stop making payments or to make smaller payments than you’re required to. Forbearance can give you some breathing room if you’re facing financial difficulties or other challenges that make it hard to keep up with your student loan payments.
Forbearance is not forgiveness—you will still owe the full amount of your loan when the forbearance period ends. And while interest doesn’t accrue on some types of federal loans during periods of mandatory forbearance, it does accrue on all loans during periods of discretionary forbearance. That means the total amount you owe on your loan will increase if you have interest accruing during periods of forbearance.
When is Forbearance a Good Idea?
Forbearance can be a good idea if you’re experiencing a short-term financial hardship and you need to temporarily lower or postpone your student loan payments. Forbearing your loans means you’re not required to make payments for a specific period of time. During forbearance, interest still accrues on most types of loans.
Here are some examples of when forbearance might be a good option:
– You’ve lost your job but expect to be employed again soon.
– You’re experiencing underemployment and can’t afford your current monthly payment.
– You’re in the process of changing jobs and need some time to get things sorted out financially.
– You or your spouse is called to active duty military service.
In general, you should only consider forbearance as a temporary solution. If you think you’ll need more than six months of forbearance, you might want to consider another option, such as deferment or income-driven repayment, which could offer longer periods without required payments or lower monthly payments based on your income.
How to Request Forbearance from Your Lender
If you’re struggling to make your student loan payments, you might be able to request forbearance from your lender. This would temporarily suspend or reduce your payments, giving you some much-needed financial relief.
There are two types of forbearance: discretionary and mandatory. Discretionary forbearance is granted at the lender’s discretion, while mandatory forbearance is available in specific situations like economic hardship or service in a medical or dental internship or residency.
To request forbearance, you’ll need to contact your loan servicer and let them know why you’re having difficulty making payments. If you have a federal loan, you can fill out an online form. If you have a private loan, you’ll need to reach out to your servicer directly.
In most cases, forbearance is granted for a period of up to 12 months at a time. You can continue to request forbearance if you need more time, but keep in mind that interest will continue to accrue on your loans during this period.
If you’re considering forbearance as an option, be sure to weigh the pros and cons before making a decision. Forbearance can give you some much-needed breathing room if you’re facing financial difficulties, but it also means that you’ll end up paying more interest in the long run.
What Happens if You Can’t Make Your Forbearance Payment?
If you’re struggling to make your regular student loan payments, you might be able to get a forbearance on your loans. This means your lender agrees to let you make smaller payments or pause your payments for a period of time.
However, if you can’t make your forbearance payment, there are a few things that could happen. First, your lender may report the missed payment to the credit bureaus, which could damage your credit score. Additionally, interest will continue to accrue on your loans during the forbearance period, which means you’ll end up owing more money than you did before.
If you’re considering asking for a forbearance on your student loans, be sure to explore all of your options first. You might be able to qualify for an income-driven repayment plan, which would lower your monthly payments based on your income and family size. You might also be eligible for deferment or forbearance if you’re experiencing financial hardship due to job loss, illness, or disability.
The Bottom Line
Forbearance on a student loan means that you can temporarily stop making payments or make smaller payments than usual. This is usually granted if you’re experiencing financial hardship or some other extenuating circumstance.
There are two types of forbearance: mandatory and discretionary. Mandatory forbearance is available for certain borrowers who meet specific criteria, while discretionary forbearance is granted at the lender’s discretion.
Forbearance is not a long-term solution, and interest will continue to accrue on your loan during the forbearance period. Once the forbearance period ends, you’ll be responsible for repaying any unpaid interest as well as your regular loan payments.
If you’re struggling to make your student loan payments, contact your lender to discuss your options. Forbearance may be a good option for you if it’s available and you meet the eligibility requirements.