Understanding Student Loan Forbearance: Requirements, Implications, and Alternatives

Student loan forbearance is a temporary solution designed to provide short-term relief to borrowers struggling to make their payments. It allows you to temporarily pause or reduce your monthly payments. However, it’s crucial to understand that forbearance is not a long-term affordability strategy and should be considered a last resort to avoid student loan default. Use it only if all the following are true: You can’t pay your loans, You expect to be able to resume repayment within a year or sooner, You won’t qualify for student loan deferment, which is a better option for pausing repayment because interest does not typically accrue.

What is Federal Student Loan Forbearance?

Federal student loan forbearance is an option that lets you temporarily pause or reduce your monthly payments. Depending on the type of forbearance, your loan servicer may grant a temporary pause if you’re facing financial difficulties, you’re in a residency program, or you’re called up for National Guard duty, among other reasons.

Key Drawbacks

Before opting for forbearance, it’s essential to consider the following drawbacks:

Accrued Interest: Interest will typically accrue on your debt, increasing the amount you’ll pay overall.
Limited Duration: Typically, a federal student loan forbearance can last no more than 12 months at a time, and you may be limited to three total years of forbearance over the life of your loan - though the limit varies based on the type of forbearance.

Three Types of Federal Student Loan Forbearance

There are three overarching types of federal student loan forbearance: general, mandatory, and administrative.

1. General Forbearance

This type of forbearance is up to your servicer’s discretion - which is why it’s also sometimes called a “discretionary forbearance.” Depending on your servicer, you may have to demonstrate financial difficulties, medical expenses, employment changes, or other acceptable reasons. General forbearance is available for Direct Loans, FFELP loans, and Perkins Loans. You can use it for 12 months at a time, for up to three years total over the life of your loan.

2. Mandatory Forbearance

Your loan servicer is required to grant you a mandatory forbearance if you meet certain conditions. Some of these conditions include:

Department of Defense Student Loan Repayment Program.
You’re in a medical or dental internship or residency program.
You’re in the National Guard and have been activated by a governor. This forbearance is an option if you are not eligible for a military deferment.
You have a “student loan burden,” which means that the total amount you owe each month for all the federal student loans you received is 20% or more of your total monthly gross income.

You can use a mandatory forbearance for up to 12 months at a time, renewable indefinitely as long as you meet the qualifying conditions.

3. Administrative Forbearance

The Education Department may automatically apply an administrative forbearance to your student loan account in response to new policies or legal issues. For example, the three-year pandemic payment pause was a type of administrative forbearance, as is the ongoing SAVE forbearance.

How to Apply for Federal Student Loan Forbearance

In most cases, you need to apply for a student loan forbearance with your servicer; it’s not usually automatic, with the exception of some types of administrative forbearance. Here are the steps to take:

Identify which type of forbearance you’d like to apply to.
Gather any necessary documents that are mentioned on your request form.
Submit your completed forbearance request form and additional documents to your servicer. Otherwise, you could face delinquency or default.

Private Student Loan Forbearance

Many private lenders offer student loan forbearance as well. This forbearance usually lasts for up to 12 months, but there’s no standard or required amount for private lenders. Look at your loan’s origination paperwork or contact your lender to learn about your forbearance options and the application process.

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SAVE Forbearance

Payments are not currently due for the millions of borrowers enrolled in the income-driven repayment plan SAVE, due to a series of lawsuits against the plan. This SAVE forbearance is a type of administrative forbearance, which means that it is not elective - the government has automatically applied it to SAVE borrowers accounts. During the SAVE forbearance, no interest is accruing on your loans. However, you won’t get automatic credit toward Public Service Loan Forgiveness or income-driven repayment forgiveness during this time.

If you’re not pursuing loan forgiveness, consider making payments anyway during this SAVE forbearance. Since no interest is accruing on your loans, you could pay them off faster and spend less money overall. But, if you are pursuing PSLF or IDR forgiveness, consider switching to a different IDR plan or holding off on payments until the forbearance ends.

Who Should Use Student Loan Forbearance?

Student loan forbearance is a quick fix, but its costs make it a less-than-ideal relief option. Choose forbearance only for a short, one-off financial crisis.

If forbearance makes sense for you, opt to reduce your payments - instead of stopping them altogether - or to at least pay the interest that accrues before it capitalizes. This will help prevent a tough financial situation from getting worse.

Is Student Loan Forbearance Bad?

Student loan forbearance isn’t bad if the alternative is having your wages garnished or losing your tax refund because of a defaulted loan. But forbearance can be expensive.

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Most often when you put loans in forbearance, interest continues to accrue on your balance. If you have commercially-held FFELP loans, interest capitalizes on your student loans, or is added to your balance, at the end of the forbearance. If you don’t pay down the interest as it accrues, capitalization increases the amount you end up repaying. (Interest does not capitalize after forbearance for other types of federal loans.) Because forbearance is often available to anyone with financial difficulties - and there’s no limit to how long you can get it for - these costs can really add up over time.

For example, after putting $30,000 in loans on hold for 12 months at 6% interest, $1,800 worth of interest would have accrued. Now, you’d owe $31,800.

Alternatives to Student Loan Forbearance

Forbearance isn’t the only pathway to student loan relief, and in many cases, other options might work better for you. Before opting for forbearance, consider these alternatives:

Student Loan Deferment: Student loan deferment is another way to pause federal student loan payments, and it’s a better option than forbearance because you won’t have to pay interest on any subsidized student loans you have. You’ll qualify for deferment in certain circumstances - you can get an unemployment deferment, for instance - so ask your student loan servicer if that’s an option before going with forbearance.
Income-Driven Repayment Plans: Income-driven repayment plans tie payments to a percentage of your earnings; you can pay as little as $0. Because of their longer repayment terms, you could pay more interest on an income-driven plan. But any remaining balance on your loans will be forgiven after 20 or 25 years of payments, depending on the plan. Sign up for free at studentaid.gov/IDR.
Private Loan Relief: The difference between deferment and forbearance isn’t usually substantial for private student loans, as both accrue interest you’ll be responsible for paying. If you can’t afford private loan payments, lenders may also offer other forms of relief, like letting you make interest-only or interest-free payments for a limited period of time.

Borrower Rights and Responsibilities

As a federal loan borrower, you have certain rights and responsibilities associated with repaying your federal loans. Before you leave school, drop below half-time enrollment, or withdraw from all your courses in a term, you are required to complete exit counseling for each loan program from which you borrowed.

Repayment Plans

Repayment of Federal Direct Loans is not required while you are in school at least half time. Each of your Direct Subsidized and Unsubsidized Loans has a six-month grace period that starts the day after you stop attending school or drop below half-time enrollment. Your first payment is due within 60 days after the day your six-month grace period ends. The direct loan servicer will notify you of your first payment due date during your grace period. You may choose one of the following repayment plans to repay your loan. If you do not choose a repayment plan, you will automatically be placed on the standard repayment plan. You may be able to change repayment plans after you begin repaying your loan.

Standard Repayment Plan: You will make fixed monthly payments over a period of 10 years.
Income-Based Repayment Plan: Your required monthly payment will be based on your income during any period when you have partial financial hardship.

Additional Loan Forgiveness Programs

Teacher Loan Forgiveness Program: The Teacher Loan Forgiveness Program grants loan forgiveness of up to $17,500 for teachers in certain specialties, and up to $5,000 for other teachers who teach for five years in low-income schools and meet other requirements.
Loan Forgiveness for Public Service Employees Program: The Loan Forgiveness for Public Service Employees Program provides for the cancellation of the remaining balance due on eligible federal student loans under certain circumstances. Loans may be eligible after the borrower has made 120 monthly payments on or after October 1, 2007, under certain repayment plans under the Direct Loan Program while employed in certain public service fields.

Federal Direct PLUS Loans

The borrower has the option of beginning repayment on a Federal Direct Parent PLUS Loan 60 days after the loan is fully disbursed or six months after the dependent student on whose behalf the parent borrowed the loan ceases to be enrolled at least half time. The direct loan servicer will notify the borrower of the first payment due date. The borrower of a Federal Direct Parent PLUS Loan has nearly all the repayment plan options that Direct Stafford Loan borrowers have. However, the Direct Loan Income Contingent and Income-Based Repayment Plans are not options for Direct Parent PLUS Loan borrowers. See the Federal Student Aid’s guide to repaying loans for more information on repayment plans. Generally, the conditions for eligibility and procedures for requesting a deferment or forbearance apply to both Stafford Loans and PLUS Loans.

As a borrower of a Federal Direct Graduate PLUS Loan, you have nearly all the repayment plan options that Direct Stafford Loan borrowers have. The exception is that the Direct Loan Income Contingent Repayment Plan is not an option for Federal Direct Graduate PLUS Loan borrowers. If you are having trouble making payments on your Federal Direct Graduate PLUS Loan, you should immediately contact your Federal Loan Servicer to discuss eligibility for a deferment or forbearance.

Federal Perkins Loans

Repayment of Federal Perkins Loans is not required while you are in school at least half time. Your Federal Perkins Loan has a 9-month grace period that starts the day after you stop attending school or you drop below half time enrollment. Federal Perkins Loan payments are due to the Harvard University Student Loan Office on the first day of every month following the expiration of your grace period. Harvard University Student Loan Office will notify you of your first payment due date during your grace period. The Federal Perkins Loan generally carries a minimum monthly payment between $30 and $40; your payment may be higher depending on your loan balance. As a Federal Perkins Loan borrower, you may be entitled to certain deferment options. Federal Perkins Loan cancellation is available for a variety of public service jobs including teaching, military, and nursing.

Sallie Mae Deferment

Deferring payments lets you reduce or postpone your payments. If your request is approved, your Sallie Mae loan(s) will return to the repayment option you initially chose (i.e., interest, fixed, or deferred). When you defer, interest will continue to accrue (grow) while you’re in school or in an internship, law clerkship, fellowship, or residency program, which will increase your Total Loan Cost, and you may end up paying more for your loan overall. If your school is listed at studentclearinghouse.org, they’ll automatically verify it electronically. To request a deferment, download an Internship, Law Clerkship, Fellowship, or Residency Deferment Form.

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