Student Loan Forbearance

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are basically renegotiating the terms of the loan, and this almost always means extending loan payments.  Be careful that you suddenly don’t find yourself with an interest rate on your loan that is substantially higher than it previously was.

There are times when federal loans can be subject to discretionary forbearance (the decision is up to the lender), administrative forbearance, when a loan dismissal is being processed or for some other administrative reason, or mandatory forbearance.  Some circumstances for which the latter applies are active deployment in military service during a time of war or conflict, service in an approved residency program or internship or in some public service positions, loan forgiveness programs for teachers and the military, if your loan payments exceed 20% of your gross monthly income.  Borrowers need to be aware of these options and ask their loan officers to clarify the rules if they think they might qualify.

Interest is not normally subsidized by the federal government in forbearance as it can be with certain deferments.  This means that the interest on the loan will be added to the amount of principle owed.  If there is any way to pay off at least the loan interest charges during the forbearance period, then that would be advisable in order to avoid having the loan principle balloon out of hand.  Basically student loan forbearance is an avenue to buy a little time and keep yourself out of default.  Default if the last thing you want to have happen to your student loans and can cause immeasurable pain.  You will have huge fees attached to your loan for being late and going into default, and you will even pay 25-40% of the total loan and accrued interest for the pleasure of being harassed mercilessly by loan collection agencies.  Student loan borrowers would do well to avoid default like the plague.

Legitimate reasons for requesting student loan forbearance would include being a student less than half-time which would not let you qualify for an in-school deferment, if you have exceeded the time limit for an unemployment deferment, if poor health prevents you from working or making payments, or if you experience a life-changing event like the death of a spouse or the birth of a child. 

If you need to resort to applying for student loan forbearance you need to realize that you are buying time to get to a point where you can resume making regular payments on your loans and that you are essentially skating on thin ice.  All during this time, which can last several years if your forbearance request is approved, your loan will be accruing interest and you are basically digging yourself deeper into the hole.  Student borrowers must realize the consequences of defaulting on their loans even before they sign the loan papers.  Millions of Americans have gone into default on student loans and are shocked to learn that they now owe three or four times the amount they originally borrowed.  Most of these people are overwhelmed by their student loan debt and cannot see any way  to get out from under it.  They see their futures as very dim because of their student loan debt.  If student loan forbearance is one way to avoid all this, then it is worth it.  Just remember, you will never get rid of your student debt if you default on your loans.  Even if bankruptcy is declared student loan debt is never forgiven as it would be for credit card debt, for example.  And the fact that student loan companies make more money from loans that default than they do from loans that are paid back normally should tell you something.  Try to avoid using student loan forbearance if at all possible, but it can be worth it if it helps you to avoid the horrors of default.