Editor's Note: For the latest developments regarding federal student loan debt repayment, check out our student debt guide.
If you’re facing a financial squeeze, you may be able to get a temporary break on repaying a student loan with student loan forbearance. The catch is you could end up owing more.
That’s because interest accrues on nearly all federal student loans in forbearance and on all private student loans, if the private lender offers such a program. (Note: Previously, this accrued interest would be added to the loan principal following the period of forbearance — a process known as interest capitalization — but new rules issued by the Department of Education in July 2023 eliminated capitalization in this scenario.)
Even though a payment reprieve through forbearance can bring short-term relief, it might be worth exploring alternatives. Read on to learn how student loan forbearance works — and other options you may want to consider.
What Does Student Loan Forbearance Mean?
What is forbearance? It’s an approved period during which a borrower is allowed to temporarily suspend loan payments.
There are two main types of federal student loan forbearance: general and mandatory.
General Forbearance
With general forbearance, sometimes called discretionary forbearance, your loan servicer will decide whether or not to grant your request for forbearance if you are unable to afford your loan payments.
General forbearance is available for Direct Loans, Federal Family Education Loan (FFEL) Program loans, and Perkins Loans for up to 12 months at a time. Borrowers still experiencing hardship when the forbearance period expires can reapply and request another general forbearance.
Mandatory Forbearance
Your loan servicer is required to grant you forbearance if you meet certain criteria including:
• You are serving in a medical or dental internship or residency program, and you meet certain requirements.
• The total amount you owe each month for all federal student loans 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 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.
Direct and FFEL loans qualify for mandatory forbearance for any of the above reasons. Perkins Loans also qualify if a borrower has a heavy student loan debt burden.
Mandatory forbearance is to be granted for no more than 12 months at a time, but it can be extended if you continue to meet eligibility requirements.
💡 Quick Tip: Get flexible terms and competitive rates when you refinance your student loan with SoFi.
Private Student Loan Forbearance
What is forbearance for private student loans? Some private lenders offer this option.
If you’re having trouble making private student loans payments, contact your loan holder immediately. They might offer you interest-only payments, interest-free payments, or a change in interest rate. It’s important to get in touch with your loan provider before you miss a payment and risk your loan going into default.
Who Should Use Student Loan Forbearance?
Forbearance on federal student loans may be a good choice if you don’t qualify for deferment or an income-driven repayment plan, and your hardship is temporary.
What is student loan deferment? While both student loan deferment and forbearance offer the opportunity to press pause on your student loan payments, there’s a key difference: During deferment, you may not have to pay the interest that accrues on Direct Subsidized Loans, Federal Perkins Loans, and the subsidized portion of Direct Consolidation Loans or FFEL Consolidation Loans.
With private student loans, borrowers anticipating trouble making payments would be wise to contact their loan servicer to seek a solution. Whether the lender calls it deferment or forbearance, interest typically accrues and it is the borrower’s responsibility.
Is Student Loan Forbearance Bad?
As a stopgap measure, no.
Student loan forbearance certainly beats having late payments or a loan default on your credit reports. Most federal student loans enter default when payments are 270 days past due, but federal Perkins Loans and private student loans can go into default after just one missed payment.
If you default on a student loan, the entire balance of a federal student loan (principal and interest) becomes immediately due. (Note that federal borrowers are protected from default during the on-ramp period from October 2023 to September 2024.)
If your federal student loan is in collections, and you do not enter into a repayment agreement or you renege on the agreement, the collection agency can garnish your wages — up to 15% of your disposable pay.
As if that weren’t enough of a deterrent, borrowers in default can expect to have part or all of their tax refund taken and applied automatically to federal student loan debt.
Private student loans typically go into default after 90 days. The lender may hire a collection agency or file a lawsuit. Any collection fees are stated in the loan agreement.
Recommended: Private Student Loans Guide
Pros and Cons of Student Loan Forbearance
Postponing your student loan payments has its advantages and disadvantages.
Pros
• Forbearance can help you avoid the negative financial impact of going into default, including the risk of having your wages garnished.
• It does not affect your credit scores because the missed payments are not reported on your credit reports.
• It can give you a chance to catch your breath when money is tight.
Cons
• Interest will accrue during forbearance, which means you’ll likely have a larger loan balance waiting for you when you resume repayment.
• If you’re pursuing federal student loan forgiveness, any period of forbearance probably will not count toward your forgiveness requirements.
• It’s a short-term solution, typically 12 months, though you can renew if you’re still struggling to pay your loans.
Alternatives to Forbearance
Income-Driven Repayment Plans
If you’re having trouble making student loan payments because of circumstances that may continue for an extended period, or if you’re unsure when you’ll be able to afford to resume payments, one option is an income-based repayment plan.
Monthly payments are determined by your income and family size. After 20 or 25 years on regular, on-time payments, any remaining loan balance may be forgiven depending on the type of loan you have.
The Department of Education recently introduced the SAVE plan, a new income-driven repayment plan. Depending on your financial circumstances, if you qualify, your monthly payments could be as low as $0, and interest does not accrue. If you’re eligible, this is a better option than forbearance.
Student Loan Refinancing
Refinancing student loans with a private lender is another option to consider. You take out one new loan, hopefully with a lower interest rate, to pay off one or more old loans.
One of the other advantages of refinancing student loans is that you may also be able to change the length of the loan.
Borrowers eligible for student loan refinancing typically have a solid financial history, including a good credit score. It’s important to note that if you refinance federal student loans with a private lender, you give up federal benefits like income-driven repayment, loan forgiveness, and federal forbearance.
Recommended: Student Loan Refinancing Calculator
The Takeaway
What is student loan forbearance? Student loan forbearance is an option to temporarily suspend loan payments when you’re struggling to make them. But in almost all cases, interest will accrue and be added to the loan. Student loan deferment, income-driven repayment, or refinancing could make more sense for you.
Looking to lower your monthly student loan payment? Refinancing may be one way to do it — by extending your loan term, getting a lower interest rate than what you currently have, or both. (Please note that refinancing federal loans makes them ineligible for federal forgiveness and protections. Also, lengthening your loan term may mean paying more in interest over the life of the loan.) SoFi student loan refinancing offers flexible terms that fit your budget.
SoFi Student Loan Refinance
If you are a federal student loan borrower, you should consider all of your repayment opportunities including the opportunity to refinance your student loan debt at a lower APR or to extend your term to achieve a lower monthly payment. Please note that once you refinance federal student loans you will no longer be eligible for current or future flexible payment options available to federal loan borrowers, including but not limited to income-based repayment plans or extended repayment plans.
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