If you can’t make your student loan payments, you have options. One of those options is forbearance, which allows you to temporarily stop making payments or to make smaller payments than you’re required to.
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If you can’t make your student loan payments, don’t worry. You have options. One option is called forbearance.
Forbearance allows you to temporarily stop making payments or to make smaller payments than you normally would. With forbearance, you’ll still owe the money you borrowed, and your loan might accrue interest during the forbearance period.
There are two types of forbearance: mandatory and discretionary.
With mandatory forbearance, your loan servicer must grant your request if you meet certain criteria. For example, if you’re experiencing financial hardship or if you’re a medical resident or intern, you might qualify for mandatory forbearance.
Discretionary forbearance is granted at the loan servicer’s discretion, and it isn’t available for all loans. If granted, it’s generally for up to 12 months at a time. Discretionary forbearances can be extended for additional 12-month periods if needed.
What is forbearance?
Forbearance is when you are allowed to temporarily stop making payments on your student loan. This can be helpful if you are experiencing a financial hardship and cannot afford your monthly payment. It is important to note that interest will still accrue on your loan while in forbearance which means your loan balance will increase.
Types of forbearance
Forbearance is a temporary postponement of payments on your student loans. If you’re experiencing a financial hardship, you might qualify for forbearance. There are two types of forbearance—general and mandatory.
General forbearance is available for Direct Loans, FFEL Program loans, and Perkins Loans. If you have trouble making your regular payments, but don’t meet the criteria for mandatory forbearance, you might be able to get general forbearance. You can get general forbearance for up to 12 months at a time. You can request additional periods of general forbearance if you still can’t make your payments.
Mandatory forbearances are available for Direct Loans and FFEL Program loans only. You might be able (but not required) to get a mandatory forbearance if you participate in certain public service jobs or meet other criteria described below.
You might be able to get a mandatory forbearance if you: Serve in a medical or dental internship or residency program and meet certain requirements Serve in a national service position such as AmeriCorps Are a member of the National Guard and have been activated by a governor (but not ordered to active duty by the president), OR are a reserve member who has been ordered to perform active duty serve Are unable to make your student loan payments due to unforeseen circumstances beyond your control
How to get forbearance
There are a few ways to get forbearance on your student loans:
Contact your loan servicer: You can request forbearance from your loan servicer. If you have multiple student loans, you’ll need to contact each servicer individually.
Apply for an income-driven repayment plan: You might be able to lower your monthly payments by switching to an income-driven repayment plan. While enrolled in one of these plans, you can get up to 3 years of forbearance.
Get deferment: You might qualify for deferment if you’re enrolled in school at least half-time, in a graduate fellowship program, or experiencing economic hardship. Interest continues to accrue during deferment, so it’s not a good idea to use this option unless you absolutely need to.
Consolidate your loans: You can consolidate your federal student loans into a single Direct Consolidation Loan. This might help make your payments more manageable, but it doesn’t lower your monthly payment amount or give you any additional time to repay your loans.
The pros and cons of forbearance
Forbearance on a student loan means that you can temporarily stop making payments on your loan or make reduced payments. This can be helpful if you’re having trouble making your regular payments. The downside is that interest will continue to accrue during the forbearance period, and your loan balance will increase.
Forbearance can provide welcome relief for a borrower struggling to make monthly loan payments. By reducing or suspending payments, forbearance eases the immediate financial burden and gives the borrower time to get back on their feet.
In addition, interest accrues on most types of loans during forbearance, which means that the borrower’s total debt will grow. However, this is generally not the case with Direct Loans; with these loans, interest is automatically waived during periods of mandatory forbearance.
While forbearance may provide some much-needed breathing room when it comes to repaying your loans, there are some drawbacks to using this option. One of the biggest disadvantages is that, during the forbearance period, your loan balance may actually increase. This is because, with many types of loans, the interest accrues even though you’re not making payments. So, while you may be putting off making payments for a few months or even a year, your loan balance will continue to grow during that time.
Another downside to forbearance is that it can negatively impact your credit score. Although not making mortgage or student loan payments on time can certainly hurt your credit score, placing your loans in forbearance may also have an adverse effect. Some creditors view forbearance as a sign that you’re struggling to repay your debt and may be more hesitant to extend new lines of credit to you in the future.
So, while forbearance may offer some short-term relief from your monthly loan payments, it’s important to consider the long-term effects before making this decision.
When should you consider forbearance?
There are a few instances in which forbearance may be a good idea. First, you might consider forbearance if you’re having trouble making your payments but don’t think you’ll qualify for a different type of repayment plan.
Forbearance can also give you some breathing room if you’re going back to school and can’t afford your current monthly payment. And, finally, if you’re facing financial difficulties or an emergency, forbearance may help you get by until you’re back on your feet.
If any of these situations sound familiar, contact your loan servicer to discuss whether forbearance is right for you.
How to make forbearance work for you
If you’re struggling to make your student loan payments, you might be considering forbearance as a way to make things more manageable. Forbearance can be a good option if you’re facing short-term financial difficulties, but it’s important to understand how it works and what the potential downsides are before you make a decision.
Create a budget
The first step in creating a budget is understanding your income and expenses. Your income includes money you earn from employment, investment vehicles such as stocks or real estate, and other sources such as alimony or child support. Your expenses include fixed costs like mortgage or rent payments, car insurance premiums, and credit card minimum payments. They also include variable costs like heat, electricity, gas, and food.
You can use a budgeting app or create a spreadsheet to track your income and expenses. Once you have a clear picture of your financial situation, you can start working on creating a forbearance plan.
If your income is less than your expenses, you may need to make some sacrifices in order to make forbearance work for you. You may need to cut back on spending in order to free up money to put towards your student loan payments. You may also need to find ways to increase your income, such as picking up extra shifts at work or finding a side hustle.
If your income is more than your expenses, you may have some room to work with when it comes to forbearance. You may be able to make smaller sacrifices in order to still comfortably make your student loan payments each month. However, it’s important that you don’t take on more debt in order to free up money for forbearance – this will only put you in a worse financial situation in the long run.
No matter what your financial situation looks like, it’s important that you create a budget and stick to it during the forbearance period. This will help ensure that you’re able to make all of your payments on time and avoid defaulting on your loans.
Prioritize your debts
When you have multiple debts, it can be tough to decide which one to focus on. forbearance gives you a chance to take a step back and analyze all of your debts to figure out which ones should be your top priorities.
There are a couple of different ways to prioritize your debts:
The debt snowball method: You focus on paying off your smallest debt first, then use the money you would have used to pay off that debt to attack the next smallest debt, and so on. This method can be motivating because you see results quickly.
The debt avalanche method: You focus on paying off your debt with the highest interest rate first. This method saves you money in the long run because you’re not paying as much in interest.
Once you’ve decided which method is right for you, make a list of all your debts from smallest to largest (or highest interest rate to lowest). From there, you can start chipping away at them one by one.
If you’re considering forbearance as an option for your student loans, it’s important to remember that this is a temporary measure. You may be able to postpone payments, but interest will continue to accrue on your loans, which can add up quickly.
It’s important to stay disciplined while you’re in forbearance, so that you can make a plan to catch up on your payments once the forbearance period ends. You may want to consider making interest-only payments during this time, so that you can keep your loan balance from growing too much larger.
If you’re struggling to make ends meet and are considering forbearance as an option, be sure to speak with your loan servicer about all of the available options. There may be other options available that could better help you get back on track with your student loan payments.
In summary, forbearance on a student loan is when you are allowed to temporarily stop making payments or reduce your monthly payment. This can be a helpful option if you’re experiencing financial hardship or are unable to make your full payment. There are two types of forbearance — mandatory and voluntary. With mandatory forbearance, your lender is required to offer you this option if you meet certain criteria. Voluntary forbearance is when you request forbearance from your lender and they may or may not approve your request. Keep in mind that interest will continue to accrue during forbearance, so it’s important to consider other options before choosing this option.