Student loan forbearance is an option that allows you to pause payments during hardship. This is a temporary pause that can offer borrowers much-needed relief when they are stretched financially. Payments resume when the forbearance period ends. While this option has its advantages, it has a few downsides too.

These are some of the important things you need to know about student loan forbearance.

What Does Student Loan Forbearance Mean?

Student loan forbearance is a facility that some lenders offer student loan borrowers. It can offer you some flexibility when you’re struggling to keep up with your monthly loan repayments. For example, if you lose your job, you may struggle to meet your monthly repayment commitments. At times like this, forbearance can help.

Recurring medical expenses and change of employment are other common reasons why borrowers apply for forbearance.

The U.S. Department of Education grants forbearance on most (not all) federal student loans. Private lenders are not required to offer this provision, but they may offer other options. If you’re struggling to make your monthly payments, you can request your lender or loan servicer for forbearance.

If your request is approved, your payments will be put on hold for a specified period. During the approved forbearance period, you’re not required to pay anything towards your loan repayment.

Two Important Things to Understand About Student Loan Forbearance

The first thing you should know is that forbearance only stops your monthly payments, but it does not stop the interest from accruing. Interest continues to accrue during the forbearance period. The accrued interest is added to your loan balance at the end of the forbearance period.

If you’re already in default on your federal student loans, you won’t be eligible for forbearance. Your loan is in default if you’re 270 days or more behind on the payments. In this case, you’ll need to first consolidate or rehabilitate your student loans. This will help you regain eligibility for forbearance.

Which Student Loans Qualify for Forbearance?

All student loans don’t automatically qualify for forbearance.

The U.S. Department of Education offers two types of forbearances for eligible federal student loans – general and mandatory forbearance.

General forbearance

You may qualify for general forbearance if you have any of these federal student loans:

• Direct Loans
• Perkins Loans
• Federal Family Education (FFEL) Program loans

General forbearances on the above student loans are granted for no more than twelve months at a time. You may request another general forbearance if you’re still unable to make payments after twelve months. There is a cumulative limit of three years on general forbearances.

Mandatory forbearance

You may qualify for a mandatory forbearance if you have Direct Loans and FFEL Program loans and meet these requirements:

• You’re serving in an AmeriCorps position and have received a national service award
• You’re serving in a medical or dental residency or internship program and meet specific criteria
• You’re a National Guard member but not eligible for military deferment
• Your total federal student loan monthly repayments are more than your total monthly gross income
• Your teaching service qualifies you for teacher loan forgiveness

Mandatory forbearances are also granted for twelve months at a time. You may request an extension after twelve months but only if you continue to meet the eligibility requirements.

When it comes to private student loans, whether or not you can get forbearance depends on the lender. All private lenders don’t offer student loan forbearance. But many may offer other solutions to borrowers who can’t afford the monthly payments.

Forbearance And Deferment Are Not the Same

Both forbearance and deferment allow borrowers to pause payments temporarily. But that’s where the similarities end.

The biggest difference between the two is related to the continued interest accrual. Your student loans continue to accrue interest during the forbearance period. The accrued interest is added to your balance when the forbearance period ends. That means the balance at the end of the forbearance period will be higher than what it was at the start date.

With deferment, the interest does not accrue on subsidized loans. When the deferment period ends, your loan balance will be the same as when the deferment period started.

Another difference is you can request for a longer deferment period of up to 36 months.

Pros and Cons of Student Loan Forbearance

Using student loan forbearance to pause payments has its advantages and downsides.

Pros of student loan forbearance:

• Offers temporary relief from monthly payments when you’re struggling financially
• Frees up money to cover critical expenses
• The interest rate is lower than that of personal loans or payday loans
• Does not hurt your credit score
• Minimizes risk of default, which can impact your credit score
• Far better than garnishment of wages due to default
• Gives you time to explore other repayment options such as income-driven repayment plans, refinancing, or consolidation

Cons of student loan forbearance

• Capitalization of accrued interest means you have to repay a large loan balance when forbearance ends
• Not a long-term solution for saving money on student loans
• May not be an option with private student loans

Is Forbearance the Right Option for You?

Student loan forbearance can help when you’re financially strapped and cannot afford your monthly payments. It’s far better than defaulting on your payments. However, this is not a long-term solution, and you shouldn’t use it to delay repayments indefinitely. Pausing your loans using forbearance keeps increasing the amount you owe, making it even more unaffordable.

Choose forbearance only to overcome a short-term financial crisis. Explore other solutions if your financial situation is likely to continue for a longer time. Consider an income-driven repayment plan that keeps your payments more manageable. Or consider refinancing to lower your payments may be a better solution for the long term.