While you were in college, classes, exams, and your social life probably took priority over your student loan repayment plan. In a student loan utopia, people would be able to easily repay their debts.
Unfortunately, that’s not the current reality—student loan debt in America is at an all-time high. If you are struggling to make your monthly payments on your federal student loans, know that there are options you can consider if you feel you’re at risk for default. One of those options is forbearance.
When an eligible federal student loan account is in forbearance , it means monthly payments are temporarily stopped. However, though monthly payments on the loan are not required while it is in forbearance, interest will still accrue . When the loan is no longer in forbearance the interest is capitalized, meaning it is added onto the initial loan principal balance.
If you are considering applying for student loan forbearance, make sure you do your research and understand what it could mean for your financial future. While not making monthly payments right now could offer immediate relief to your financial situation, forbearance could impact the total you pay over the life of the loan.
Here we’ll review different types of forbearance, loans that may qualify for forbearance, and what student loan forbearance could mean for your financial future.
Types of Student Loan Forbearance
If you are struggling to pay off your student loans and are considering student loan forbearance, the first step would be to submit a request to your student loan servicer to learn about the requirements and necessary documentation. For federal student loans, there are two main types of forbearance: general and mandatory.
With general forbearance, sometimes called discretionary forbearance, your loan servicer will decide whether or not to grant your request for forbearance. You can apply for general forbearance if you are unable to make your monthly loan payments due to financial difficulties, medical expenses, a change in employment, or other qualifying reasons determined by your loan provider.
General forbearance is available for Direct Loans, Federal Family Education Loans (FFEL) Program loans, and Perkins Loans. General forbearance will usually be granted for no more than 12 months at a time. Those still experiencing financial hardships when the forbearance period expires can reapply and request another general forbearance.
If you hold a Perkins Loan, it is important to note there is a cumulative three-year limit on general forbearance. While there is no fixed limit on general forbearance for Direct Loans and FFEL Program loans , your loan servicer may still set a limit on the amount of time you can receive a general forbearance.
If you meet the eligibility requirements for mandatory forbearance, on the other hand, your loan servicer is required to grant you forbearance. There are a variety of reasons you may be eligible for mandatory forbearance, depending on the type of loan you hold, including:
• You are serving in a medical or dental internship or residency program
• The total amount you owe each month for all the student loans you received is 20% or more of your total monthly gross income, for up to three years
• You are serving in an AmeriCorps position for which you received a national service award
• You are performing a teaching service that would qualify you for teacher loan forgiveness
• You qualify for partial repayment of your loans under the U.S. Department of Defense Student Loan Repayment Program
• You are a member of the National Guard and have been activated by a governor, but you are not eligible for a military deferment
(Note: Each of these eligibilities have their own requirements—you can learn more about them here .)
If you apply and are granted a mandatory forbearance, it is typically not granted for more than 12 months at a time. If you continue to meet the eligibility requirements for mandatory forbearance when your current forbearance period expires, you should be able to reapply and request another mandatory forbearance.
Private Loan Forbearance
Private student loans are different than federal student loans, so private lender will have different standards and policies in place to determine forbearance options (if any). Because the offerings of each company may vary, you may want to contact your loan holder to see what they are able to offer you.
Forbearance vs Deferment
While both student loan deferment and forbearance offer the opportunity to press pause on your student loan repayment, there are some key differences between the two . The major difference between them is that in deferment, you may not be responsible for paying interest on the loan during the deferment period. Here is a quick breakdown of the types of loans that likely won’t require interest payments while in deferment:
• Direct Subsidized Loans
• Subsidized Federal Stafford Loans
• Federal Perkins Loans
• The subsidized portion of Direct Consolidation Loans
• The subsidized portion of FFEL Consolidation Loans
You will be required to pay for the interest during the deferment period on the following loans:
• Direct Unsubsidized Loans
• Unsubsidized Federal Stafford Loans
• Direct PLUS Loans
• FFEL PLUS Loans
• The unsubsidized portion of Direct Consolidation Loans
• The unsubsidized portion of FFEL Consolidation Loans
Depending on the type of loan you have and your current financial situation, deferment or forbearance could be options to provide temporary relief when it comes to making your monthly student loan payments.
Considering Student Loan Forbearance?
Forbearance is a popular option for those with student loan debt—about 2.6 million Americans were in forbearance in the first quarter of 2018.
Forbearance can offer a bit of breathing room, so it could be a good solution for those facing temporary financial hardship. It may not be a good long-term strategy as interest will continue to accrue and will be added to the principal balance when the forbearance period ends.
Does Forbearance Affect Credit Score?
There are lots of things that could affect your credit score, such as defaulting on your loans. But by itself, going into forbearance does not affect your credit score. On the other hand, if you missed payments and went into default before going into forbearance, that default will likely remain in your credit history.
Student Loan Refinancing
If you are looking for an alternative to forbearance, refinancing your student loans could be an option. When you refinance your loans, you would take out one new loan, with new terms, a new interest rate, and new monthly payments, which would pay off your old loans. This new loan will hopefully have a lower monthly payment or a shorter term, the latter of which could ultimately reduce the amount of money you spend over the life of your student loans.
Borrowers eligible for student loan refinancing typically have a solid financial history, including good credit score, among other factors.
At SoFi, we offer competitive student loan refinancing. There are no prepayment penalties and SoFi offers unemployment protection—that means if eligible SoFi members lose their jobs, SoFi will temporarily pause payments and help them find new employment. When you refinance with SoFi, you’ll also gain access to our financial advisors who can help you navigate your student debt repayment.
When you’re ready to take control of your student loan debt, see how refinancing with SoFi can help.
Financial Tips & Strategies: The tips provided on this website are of a general nature and do not take into account your specific objectives, financial situation, and needs. You should always consider their appropriateness given your own circumstances.
SoFi Student Loan Refinance
Notice: SoFi refinance loans are private loans and do not have the same repayment options that the federal loan program offers such as Income-Driven Repayment plans, including Income-Contingent Repayment or PAYE. SoFi always recommends that you consult a qualified financial advisor to discuss what is best for your unique situation.
Disclaimer: Many factors affect your credit scores and the interest rates you may receive. SoFi is not a Credit Repair Organization as defined under federal or state law, including the Credit Repair Organizations Act. SoFi does not provide “credit repair” services or advice or assistance regarding “rebuilding” or “improving” your credit record, credit history, or credit rating. For details, see the FTC’s