Are you looking for a way to stop paying your student loans—at least in the interim? If this is the case, you might have heard about loan forbearance.
Often used in real estate parlance, forbearance is an option for putting off loan payments on a property. When it comes to student loans, the concept is not remotely different.
Student loan forbearance not only allows borrowers to put off loan payments temporarily, but it makes it possible for borrowers to lower the payments they have to make once payment needs to be resumed.
To know more about what forbearance is in student loans, keep reading!
What Exactly Is Student Loan Forbearance?
A student loan forbearance is a way to postpone making payments on a student loan. Also, being on student loan forbearance allows you to make regular payments towards your loan, albeit small.
If you are making payments on student loan forbearance, you can make smaller manageable payments towards your student loan. These payments can be much smaller than the principal amount you would have to pay.
In short, a student loan forbearance allows you to do one of two things:
- Postpone your payment for up to 12 months
- Pay smaller amounts—even smaller amounts than the principal amount of your loan
What a Student Loan Forbearance Is Not
There is a misconception that forbearance means a borrower can put off making payments indefinitely. This is simply not true.
At most, you can possibly delay having to make a payment for up to three years. This is especially the case if your student loan is federally approved. However, this form of debt relief is not a loan forbearance. It is a deferment.
A deferment is a form of debt relief that allows for the prolonged postponement of debt payments. Loan deferment means you would be able to defer your payment for up to three years with zero interest.
Student loan forbearance only allows you to put off payments for up to a year. In addition, as time passes in your forbearance period, interest continues to accrue. This can mean higher monthly loan payments once your forbearance expires.
What Are the Eligibility Requirements for Student Loan Forbearance?
The following conditions can make you eligible for forbearance.
Of course, you would only be applying for some sort of debt relief in light of financial difficulties. To qualify for student loan forbearance, [you need to show or state in your student loan forbearance application that](https://studentaid.gov/manage-loans/lower-payments/get-temporary-relief/forbearance#:~:text=For loans made under all,general forbearances of three years.):
- You are unemployed
- You currently have medical expenses that require paying
- You have insufficient funds to pay for your student loans
If any of the above apply, you may be eligible for what is called a general student loan forbearance. This is, at the time of writing, the most common form of student loan forbearance.
Meeting the Requirements for Mandatory Forbearance
Unlike general forbearance, a mandatory forbearance is a form of forbearance that is automatically approved due to serving in certain sectors. Also, undergoing internships or programs can be grounds for eligibility.
Here are the requirements for mandatory forbearance:
- Service in AmeriCorps at the time of the application
- Being eligible for Teacher Loan Forgiveness
- Serving in the National Guard or any branch of the military
- Medical or dental internship
- Medical or dental residency
Certain Federally-Offered Programs or Benefits
Some government programs allow beneficiaries or borrowers to be on administrative forbearance. For example, at the time of writing, the current administration has moved to place all federal student loans on administrative forbearance.
The administrative forbearance was implemented in light of the COVD-19 pandemic. According to the Federal government, student loans are suspended until February 1, 2022.
Student loan forbearance allows borrowers to postpone making payments towards their student loans. For about 12 months, borrowers can either put off payments or pay in smaller installments.
As with any form of debt relief, whether forbearance is for you depends on your situation.