Forbearance allows you to temporarily postpone payments and can be helpful especially if your financial distress is not likely to last long.
Forbearance is generally not as helpful as a deferment–which is the other way to temporarily postpone payments–because with a forbearance interest continues to accrue while the loan payments are postponed. Be careful: The loan balance can increase very quickly! Beware of servicers that insist that forbearance is the best option for you.
Before you request forbearance or deferment, you may want to consider an income-driven repayment (IDR) plan. In some cases, your monthly payment in an income-driven repayment plan can be as low as $0 per month. In IDR, you can also earn time toward having your student loan balance eventually canceled after 20 to 25 years in income-driven repayment , even if your payment is $0. In contrast, you generally do not earn time toward IDR cancellation if you are in forbearance or in most types of deferment.
Note: Under the one-time IDR account readjustment that will take place in 2023, you may receive credit for some previous time in forbearance and deferment. For more information see the Department of Education’s website here.
If you are delinquent (behind on your payments) but not yet in default, you can use forbearance to delay or avoid going into default. The nine month period before a delinquency is transformed to a default does not include periods of time when payments are subject to forbearance. So if you are behind on your loans and need temporary relief from having to pay even under an IDR plan, a temporary forbearance can be a good option to avoid default.
Additionally, the forbearance rules allow for the possibility of a forbearance to return to repayment even after default. The Department of Education has allowed borrowers to use a forbearance to “eliminate” a default if the borrower requests a retroactive forbearance shortly after becoming 270 days delinquent but before the loan is transferred to collections (for Direct Loans) or before the guarantee agency has paid a default claims (for FFEL loans). Forbearance requests and agreements may be made orally or in writing with your servicer. If you make an agreement orally, the lender must send you a written confirmation.
Forbearances are available for a number of reasons. The FFEL regulations make a distinction between mandatory forbearances (that the lender must grant) and discretionary forbearances. The Direct Loan program does not make this distinction.
Common Reasons for Forbearances:
Poor Health: Both the FFEL and Direct Loan regulations provide for forbearances if you are in poor health or have other personal problems that affect your ability to make the scheduled payments. These are discretionary under FFEL regulations. If approved, forbearance is granted up to a year at a time, but there are no limits to the number of years.
Administrative Forbearances: Both FFEL and Direct Loan regulations provide for administrative forbearances for various reasons, such as while the lender is resolving a change in loan status or while a borrower defense or other loan cancellation application is pending. With a few limited exceptions such as local or national emergencies, the FFEL administrative forbearances are discretionary.
Mandatory Forbearances: The term “mandatory” refers to the lender’s obligation to grant you a forbearance, not your obligation to request one.
Difficulty Affording Payment: Most relevant for low-income borrowers are mandatory administrative forbearances for up to five years in cases where the borrower will not be able to repay the loan within the maximum repayment term. Similarly, forbearances are mandatory in increments up to one year for periods that collectively do not exceed three years, if the amount of your monthly student loan payments collectively is equal to or greater than 20% twenty percent of your total monthly income. Borrowers may be required to submit documentation of income and other relevant information.
Since interest is charged on all loans during periods of forbearance, this can be an expensive option. If your income is insufficient to make payments, look into an income-driven repayment plan first to see if IDR payments are affordable for you.
Teachers: Forbearances are also mandatory upon request for teachers who are performing teaching service that would qualify them for teacher loan forgiveness, if the forgiveness amount is expected to satisfy the teacher’s anticipated outstanding loan balance at the time of forgiveness.
Disasters: The Department may also issue special forbearance guidance in disaster situations, including hurricanes and other natural disasters.