When you're having trouble making your federal student loan payments, it can be a terrible feeling. You may be having difficulty making your payments due to job loss, military deployment, or just because you've decided to go back to school. Whatever the reason, you will be considered delinquent and eventually in default if you fall behind on these loan payments, which will have serious, negative effects on your credit report, credit scores, and finances. It could even land you in court, which is unlikely to go well: student loans generally cannot be discharged in a bankruptcy. (See: Paperwork Snafu Could Make Billions in Student Loan Debt Disappear)
Thankfully, there are two different programs available that can help you to avoid these consequences: forbearance and deferment, separate programs that allow you temporarily stop making payments, or make reduced payments for a limited time on your federal student loans. In addition, some borrowers may benefit from loan forgiveness or consolidation programs.
Here, in part one, we examine the ins and outs of forbearance. For information on deferments please see: The 7 Types of Student Loan Deferment Requests (and How to Apply).
What is forbearance?
A forbearance program can give you a temporary break from making your student loan payments or reduce the amount of payment you owe. Forbearance programs can last for up to 12 months. Before your forbearance expires, you can re-apply or your loan will revert to its standard terms. When a forbearance program is applied to your student loan, it will still incur interest charges. You can either pay these interest charges during forbearance, or they will be applied to your principal.
There are two types of forbearance programs, general and mandatory. With general forbearance, it's up to your loan servicer to decide whether or not to grant your forbearance request. For this reason, this type of forbearance is sometimes called "discretionary forbearance." General forbearance is typically requested when a borrower has trouble making payments due to medical expenses, a change of employment, financial difficulties, or other reasons that are acceptable to you loan servicer.
General forbearances can be available for many types of government-issued student loans including Direct Loans, Federal Family Education Loan (FFEL) Program loans, and Perkins Loans, which are low-interest loans for both undergraduate and graduate students. However, you can't receive forbearance on your Perkins Loans for more than a total of three years during the life of the loan. On the other hand, if you meet the criteria for mandatory forbearance, your loan servicer is required to grant your mandatory forbearance request.
The six ways to qualify for mandatory forbearance:
- If you are serving in a medical or dental internship or residency program, and you meet specific requirements, then you can qualify for mandatory forbearance on your Direct Loans and FFEL Program loans only.
- If you payments for all of your student loans exceeds 20% of your total monthly gross income.
- If you are serving in an AmeriCorps position for which you received a national service award, for Direct Loans and FFEL Program loans only.
- You are performing teaching service that would qualify you for teacher loan forgiveness, for Direct Loans and FFEL Program loans only.
- You qualify for partial repayment of your loans under the U.S. Department of Defense Student Loan Repayment Program, for Direct Loans and FFEL Program loans only.
- You are a member of the National Guard and have been activated by a governor, but you are not eligible for a military deferment. This option applies to Direct Loans and FFEL Program loans only.
How to apply for forbearance
For both general and mandatory forbearance requests, borrowers can fill out a dedicated form to submit to their loan processor. With three pages of personal information to supply and questions to answer, the mandatory forbearance request form is the longer of the two. The questions you will have to answer for a mandatory forbearance request will help to determine the exact kind of mandatory forbearance program you are requesting.
The general forbearance request form is much more simple as it merely asks for your personal information, the reason for your request, and the duration of forbearance you are looking for. It also asks if you would like to temporarily stop making payments, or make smaller payments of an amount that you specify.
When you're having trouble making your payments, but the problem is temporary, then it's a good idea to see if either forbearance or deferment will apply to your situation, as any option is better than delinquency or default.
Editorial Disclaimer: Opinions expressed here are author's alone, not those of any bank, credit card issuer, or other company, and have not been reviewed, approved or otherwise endorsed by any of these entities. All information, including rates and fees, are accurate as of the date of publication.