Whether you have graduated or are already in repayment for your student loans, you are probably considering options to reduce your monthly payments. Depending on your situation, student loan forbearance can help you if you are finding it difficult to meet your student loan payment schedule.
Student loan forbearance is a mechanism used by lenders to assist you when you are struggling making monthly payments. A forbearance is granted at the discretion of the lender and is subject to some criteria. Once granted, a forbearance allows you to temporarily postpone student loan payments, extend the repayment schedule and can allow you to make reduced loan payments. There are four types of forbearance but the two main types that you can request from a lender are discretionary forbearance and mandatory forbearance. The other two types are administrative and mandatory administrative but are mainly used by the lender to apply to certain situations.
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Discretionary forbearance You may be granted discretionary student loan forbearance in certain financial hardship situations that impact the repayment of your debt. This is the most common type of student loan forbearance and some situations that may qualify you are: -if you are in school with an enrollment status of less than half-time. (Keep in mind that if your status is more than half-time you may qualify for student loan deferment), -if you have become unemployed (in the case when you have surpassed the maximum deferment time limit), -in poor heath, -working less hours though the reduction of hours by your employer, -in or are experiencing a sudden life circumstance which impacts your income
Also, in certain financial situations, a discretionary forbearance in the form of reduced payments may be granted. The benefit of this is that you continue making payments on your account, which is better than not making any payments whatsoever.
Mandatory forbearance The other type of forbearance is a mandatory forbearance which you can request for specific circumstances. You may be eligible for this type of student loan forbearance if you fit the following criteria:
-participating in an Internship/ Residency program (beyond the timeframe requirements for a deferment)
-if you are in a national service position where you will receive an award under the National and Community Service Trust Act of 1993
-if you have maintained your eligibility for loan forgiveness under the Teacher Loan Forgiveness Program and your lender believes that the cancellation amount will satisfy the anticipated loan balance at the time of the expected cancellation
-participating in a qualifying service as defined by the Child Care Provider Loan Forgiveness Program
-participating in qualifying service for partial loan repayment under the Student Loan Repayment Programs administered by the U.S. Department of Defense
Other Options to Consider
In certain situations, a student loan deferment may be a better option. Unlike a discretionary forbearance, you may be eligible for a deferment if you are in school, unemployed, experiencing economic hardship, or in the military. You should investigate your options and discuss your intentions with your lender. Note that interest accrues on all loans during periods of forbearance, and with a student loan deferment, the federal government pays the accruing interest on subsidized Stafford loans. Certain loans continue to accrue interest with either a forbearance or deferment. Some of these are unsubsidized Stafford loans, PLUS loans, and those portions of consolidation loans comprised of unsubsidized Stafford and PLUS loans.
One other point to consider is that federal student loan forbearance doesn't lock in interest rates. Even though loans are deferred for a period of time, they still have variable rates. If locking in a lower interest rate is your main concern, you should look into student loan consolidation.
Student loan forbearance is a worthwhile option to consider in order to help you though a period of financial hardship, poor health, reductions in work hours, and unforeseen life circumstances especially when you find yourself ineligible for student loan deferment. Investigate your options and by discussing your situation with your lender, they can help you decide which option is best for you.
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