How Does Student Loan Forbearance Work?

Posted on December 6, 2022 by Gravity Lending

Student loan forbearance, a temporary solution for those struggling with financial stress, suspends or lowers student loan payments.

How Does Student Loan Forbearance Work?

If you’re at risk of defaulting on your loans and don’t qualify for student loan deferment, forbearance may be an option to ensure your credit score doesn’t slip. However, it is not a viable long-term solution. If you’re granted a forbearance, it will reflect on your credit report but will not result in a lower score if payments are consistently made on time. If you’re currently in default on your student loans, then you will not qualify.

Forbearance Accrued Interest

Different from student loan deferment, forbearance holds borrowers accountable for the interest accrued on the loan during the forbearance period. The interest is often capitalized, meaning it is added to the principal loan balance post-forbearance with an exception for those with Perkins loans. Borrowers can save on excess interest by making consistent interest payments during the loan forbearance.

With few exceptions, most loan servicers have specific requirements for granting student loan forbearance. Often a formal request and documentation of proof are requested from borrowers seeking financial relief.

Borrowers may qualify for general or mandatory forbearance.

General Student Loan Forbearance

General student loan forbearance is applicable for those who seek assistance with Direct Loans, Federal Family Education (FFEL), and Perkins Loans. Most notability, general student loan forbearance, or “discretionary forbearance,” is at the discretion of the loan servicer, meaning they select who to grant assistance to. General forbearance is issued for 12 months at a time with a limit of three consecutive years.

Reasons for requesting general forbearance include:

Financial difficulties
Medical expenses
Change in employment
Specific reasons acceptable to your loan servicer

Mandatory Student Loan Forbearance

Mandatory forbearance mandates that assistance be granted to anyone who meets the eligibility requirements, unlike general forbearance. Loan servicers are required to accept all requests and cannot choose on a case-by-case selection. Similar to general, mandatory forbearance requests are granted for no more than 12 months at a time and can be requested multiple times.

The following mandatory forbearance situations are specific only to those with Direct Loans and Federal Family Education (FFEL) loans. The Student Loan Debt Burden is the exception, as it also applies to those with a Perkins Loan. To qualify, the total amount in federal student loans you receive each month, for all the federal student loans you received, is 20 percent or more of your total monthly gross income, for up to three years.

Private Student Loan Forbearance

Private student loan forbearance acceptance is typically less flexible than federal loans. Forbearance is mainly granted for up to 12 months with no standard offer for renewal. The designated payment amount and terms are also subject to and vary by lender. Loan interest will accrue during the forbearance period and will be capitalized upon unless the borrower makes consistent payments.

Reasons for private loan forbearance include:

School enrollment
Medical residency
Unemployment
Change in employment
Financial hardship
Active-duty military
Natural disaster
Specific reasons noted by your loan servicer

Next Steps

Once you have applied for loan forbearance, be sure to avoid becoming delinquent on your loans and negatively affecting your credit score by continuing your payment schedule until your loan servicer confirms your request.

If you’re concerned with your monthly student loan payments and believe you may qualify for student loan forbearance, speak with your loan servicer.

Gravity Lending is dedicated to improving our customers’ lives one payment at a time. We provide the knowledge and tools for the least costly financial solution available to ensure you meet your financial goals. Our experts will assist you with any student loan forbearance questions.