Student loan forbearance: Everything you need to know

When you’re experiencing financial difficulties, making ends meet while paying student loans can feel impossible. Fortunately, the Department of Education provides several options to help make your debt more affordable, including student loan forbearance.

In this article, we’ll cover what student loan forbearance is and how it could work for you.

What is student loan forbearance?

Federal student loan forbearance stops or lowers your federal student loan payments for up to 12 months if you're experiencing financial hardship or another qualifying situation.

During forbearance, interest continues to accrue, meaning the loan servicer adds interest to your loan balance, increasing your debt. However, you have the option to pay the interest as it accumulates to avoid a larger loan balance.

If you’re still experiencing financial difficulties when your forbearance period ends, you may be able to renew it. However, general forbearances have a cumulative limit of three years.

Forbearance may be available for private student loans as well, but rules vary from lender to lender. It's important to note that private student loan forbearance typically comes with less favorable terms than federal loan forbearance.

Forbearance vs. deferment

Deferment, like forbearance, pauses your student loan payments. The main difference between forbearance and deferment is that interest continues to accrue during forbearance for all loans, but it doesn’t accrue for some loan types while they’re in deferment.

You may qualify for deferment if you’re facing economic hardship; undergoing cancer treatments; going back to school; or you’re on active military duty, among other reasons.

Types of forbearance

There are several different types of student loan forbearance. Some are mandatory and others are up to the discretion of the loan servicer.

• General forbearance: Student loan borrowers having trouble keeping up with their payments on Direct Loans, Federal Family Education Loans (FFEL), or Perkins Loans can apply for general forbearance. General forbearance lasts up to 12 months and can be extended for a cumulative maximum of three years. You may qualify if you’re facing financial difficulties, have costly medical expenses, or are unemployed. Your loan servicer may accept other reasons, but this varies by servicer.
• Mandatory forbearance: Your federal Direct and FFEL student loans may qualify for mandatory forbearance if you’re serving in the AmeriCorps and received a national service award; serving in a medical or dental internship or residency program; activated in the National Guard; teaching on the path to Teacher Loan Forgiveness; eligible for partial repayment of your loans under the Department of Defense Student Loan Repayment program; or when the total you owe each month for all federal student loans is 20% or more of your total monthly gross income. If you meet the requirements for a mandatory forbearance, your loan servicer must grant it.
• Private loan forbearance: Private lenders may not be as flexible when it comes to pausing payments, including while you’re in school. However, some offer assistance when you’re experiencing unemployment or other financial difficulties. Contact your lender to explore your forbearance or deferment options.
• COVID-19 forbearance: The Department of Education had an administrative forbearance plan in place during the pandemic to help federal student loan borrowers during trying financial times. During this forbearance, interest rates were set at 0%, and borrowers with eligible loans had their payments paused. The 0% interest rate officially ended on Sept. 1, 2023, and payments resumed in October 2023.

Pros and cons of student loan forbearance

Like any personal financial decision, student loan forbearance has pros and cons. Understanding how forbearance can help and hurt is crucial to choosing the right solution during a difficult time.

Pros of forbearance

• You can pause loan payments during difficult times without damaging your credit.
• It frees up more money to take care of necessary expenses, like emergency medical bills.
• Your loans remain in good standing instead of going into default.

Cons of forbearance

• It’s typically only available for up to 12 months at a time (sometimes with up to two renewals).
• Your total loan balance can increase due to accruing interest.
• If you miss payments waiting for forbearance approval, it could hurt your credit.

How to apply for forbearance

You must apply for and wait for approval for student loan forbearance in most cases. If you don't make your student loan payments before receiving approval, it could hurt your credit score and put you into default, so don't delay if you need to apply for it.

Here are the steps to take:

1. Contact your loan servicer

Determine who your student loan servicer is and contact them to discuss forbearance and what other options you might have. Be sure to consider all options and choose the one that makes the most financial sense.

2. Complete an application

To request general forbearance on a federal student loan, complete the general forbearance application on the Federal Student Aid site. There, you can also find applications for mandatory forbearance below:

• Medical or Dental Internship/Residency, National Guard Duty, or Department of Defense Student Loan Repayment Program Forbearance Request
• Student Loan Debt Burden Forbearance Request
• Teacher Loan Forgiveness Forbearance Request
• AmeriCorps forbearance request instructions

If you have private student loans, contact your lender directly to determine if forbearance is available to you and what the application process is.

3. Provide necessary documentation

Depending on the type of forbearance you request and your servicer’s requirements, you may need to provide documentation of your financial difficulty or other circumstances, such as proof that your income dropped or evidence of sudden expenses due to an emergency.

4. Send the documents to your loan servicer

Once you’ve completed the forbearance request and gathered documentation for it, send these to your loan servicer.

Forbearance alternatives

While forbearance can offer short-term relief, it can also prolong the time it takes to clear your debt. Additionally, periods of forbearance do not count toward Public Service Loan Forgiveness (PSLF) or income-driven repayment forgiveness for those pursuing loan forgiveness. While there was a limited PSLF waiver that allowed some periods of forbearance to count toward PSLF, that opportunity ended on Oct. 31, 2022.

Before choosing forbearance, consider the following options:

Defer your loans instead

If you have federal Direct Subsidized Loans, consider loan deferment. Unlike forbearance, the government covers accrued interest during the deferment period for subsidized loans.

Switch to income-driven repayment

Income-driven repayment plans base your payment on your monthly income. There are a few income-based repayment options to consider, including:

• Saving on a Valuable Education (SAVE): The SAVE plan (formerly REPAYE) caps payments at 10% of your discretionary income but is only available for certain federal Direct Loans. In most cases, you’ll make payments for 20 years if you have undergraduate loans and 25 years if you have graduate loans. New SAVE plan benefits to reduce payments even further will go into effect in July 2024.
• Pay as You Earn (PAYE): The PAYE plan also caps monthly payments at 10% of your monthly discretionary income (but never more than your payment would be under the standard 10-year repayment plan). It’s available only for eligible federal loans and has a repayment term of 20 years.
• Income-Based Repayment (IBR): The IBR plan caps monthly payments at 10% of your monthly discretionary income for new borrowers on or after July 1, 2014, and 15% if you’re not a new borrower. The repayment period is 20 years and it’s available for nearly all federal student loans other than those made to parents.
• Income-Contingent Repayment (ICR): The ICR plan offers a payment that's the lesser of 20% of your discretionary income or what your fixed monthly payment would be over 12 years. The repayment period is 25 years and it’s available for all federal Direct Loans.

Under all four plans, any remaining balance when the repayment period is over will be forgiven.

Consolidate or refinance

Another option is to consolidate your federal loans or refinance private student loans. If you consolidate federal loans with a Direct Consolidation Loan, you can get an interest rate equal to the weighted average of all interest rates on your federal student loans. If you refinance your private loans, you'll get the current market rate that you qualify for based on your credit and income. This may or may not be lower than the interest rate on your current loan.

Before refinancing federal loans, ensure you don’t plan on taking advantage of any forgiveness programs or income-driven repayment plans offered by the government. Refinancing federal student loans into a private loan means losing access to these and other federal benefits.