Student loan forbearance is structured differently from a student loan deferment, although it is a similar arrangement. If you can’t pay your student loan bill, lenders may be willing to reduce the amount of the payment or agree to no payments at all for up to a year at a time.
When to Consider Student Loan Payment Forbearance
If your income changes for any reason and you know you will not be able to meet your financial obligations, call your lender immediately. Forbearance does not relieve you of your obligation, but deferring payment for up to three consecutive years can have a significant impact on your credit and ability to make ends meet. Forbearance is generally granted to people with a disrupted income who cannot qualify for if deferment. Common reasons for seeking a forbearance are illness, temporary financial hardship, doing a medical or dental internship or residency, military deployment or emergency circumstances.
Qualifying for Student Loan Payment Forbearance
Forbearance is generally awarded based on the borrowers request, and financial documentation is not requested. In most cases, the borrower is already behind on payments when forbearance is requested. The number of missed payments varies depending on the lender.
Once you have contacted your lender and asked for forbearance, the lender will ask why you are behind and how much time you think you will need to catch up. The information you give is crucial. The reason you are behind should be clear and unequivocal, for example serious illness, loss of a job, or the death of a family member. To convince the lender, you must show both need and the ability to make payments in the future.
After review, the lender will propose a solution, which might include a temporary payment plan, reducing the payments by deferring the interest rate and allowing you to pay principle only, or deferring the entire payment, depending on your need. Once you and the lender agree to terms, a binding agreement is signed and you are responsible for meeting the terms.
Things to Consider
If you choose a forbearance plan that involves no payments, interest will continue to accrue unless your loan is subsidized. In the long run, this can end up costing far more than the original loan, so use caution. If you need a forbearance while you’re finishing an internship with the goal of becoming a surgeon, chances are loan repayment, even with the additional interest, will not be a problem. Other reasons for forbearance might land you in real financial trouble in the long run. If you can make even small payments, it’s better to do so.