Student Loan Forbearance: How It Works and Who May Benefit

Forbearance can temporarily stop or lower student loan payments, but it always increases the amount you owe.

Ryan LaneNovember 30, 2020
Student Loan Forbearance: How It Works, and Whom It’s For
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Student loan forbearance is a way to lower or stop making your payments temporarily. It is not a long-term affordability strategy, nor is it a way to put off repayment indefinitely.

And that means very few people should use it — probably far fewer than are right now. In the first quarter of 2019, almost 2.7 million federal student loan borrowers had loans in forbearance, according to the U.S. Department of Education.

Think of forbearance as a last resort to avoid student loan default. Use it only if all the following are true:

  • You can’t pay your loans.

  • You don’t expect to wait long to restart repayment.

  • You won’t qualify for deferment, which is a better option for pausing repayment.

If you’re worried about affording your federal student loans in the long run, opt for an income-driven repayment plan instead to help keep your payments manageable.

» MORE: Deferment vs. forbearance: Which is right for you?

What is student loan forbearance?

Student loan forbearance is an option that lets you temporarily pause or reduce your monthly payments.

Federal student loan forbearance usually lasts 12 months at a time and has no maximum length. That means you can request forbearance as many times as you want, though servicers may limit how much you receive.

There are three overarching types of federal student loan forbearance: general, mandatory and administrative. Here’s when you would use each one.

You’ll request a general forbearance. This allows your student loan servicer to grant you a postponement for any reason it deems fit, like:

  • You’re dealing with medical expenses.

  • You’re between jobs and can’t afford your payments.

  • You’re experiencing other financial difficulties.

    • While there is a general forbearance application, you can ask for and receive this type of forbearance over the phone. Granting a general forbearance is entirely up to your servicer’s discretion, so this is often called discretionary forbearance as well.

    Servicers regularly approve general forbearance requests. Currently, this is the most common type of forbearance, with more than 1.5 million borrowers using this option.

    The program’s application may indicate that you have the choice to place your loans in an administrative forbearance.

    For example, if you’re applying for or recertifying an income-driven repayment plan, you can place your loans in an administrative forbearance while your paperwork is processed. This will prevent you from having to keep paying larger bills until your lower payments start.

    Unlike a general forbearance, your servicer must grant you a mandatory forbearance if you qualify for and request it. Qualifications for receiving mandatory forbearance vary and can include:

  • Participating in a medical or dental internship or residency.

  • Having student loan payments that exceed 20% of your monthly gross income.

  • Serving in AmeriCorps.

  • Performing service that will qualify you for Teacher Loan Forgiveness.

  • Serving in the National Guard, but not qualifying for military deferment.

    • To receive a mandatory forbearance, you’ll have to provide your servicer with the appropriate form and any necessary documentation, such as proof of your monthly income.

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

    » MORE: What happens if you miss a student loan payment?

    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.

    When you put loans in any type of forbearance, interest continues to accrue on your balance. That interest is capitalized, or added to your balance, at the end of the forbearance. This increases the amount you end up repaying.

    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, and future interest would accrue on that higher balance. Estimate how much a forbearance could cost you with this calculator.

    Who should use student loan forbearance?

    Student loan forbearance is a quick fix, but its costs make it a less-than-ideal repayment option. Choose forbearance only for short, one-off financial crises, like when you need money for a big auto repair or medical bill.

    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.

    Before opting for forbearance, consider these alternatives:

  • If you temporarily can’t afford any payment. 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 — when you’re unemployed, for instance — so ask your student loan servicer if that’s an option before going with forbearance.

  • If you expect long-term financial challenges. 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’ll likely 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 studentloans.gov.

  • If you have private student loans. The difference between deferment and forbearance isn’t 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.

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