Federal student loan forbearances will temporarily postpone repayment of principle balance and interest once your student loan payments have started. Although student loan payments are stopped, the student loan balance will continue to incur interest. You will have the option of making interest-only payments during the forbearance period. If not, the incurred interest will be capitalized into the principle of the student loan. Below you’ll find answers to some of the most common questions individuals have about loan forbearance.
1. Applying for a Student Loan Forbearance
Applying for student loan forbearance is simple. The majority of federal student loan lenders offer websites which service a variety of options and allow students to download and print a forbearance application. The Student Loan Forbearance application can be either mailed to the lender or faxed. Students may also request forbearance by contacting an account representative for the lender.
2. How Long Does Federal Student Loan Forbearance Last?
Student loan forbearances are for a maximum of twelve months. At the conclusion of the forbearance period, students who require an extension may apply for another twelve month forbearance period.
3. What is the Difference between Federal Student Loan Forbearance and Deferment?
Student Loan Deferment is an option of delaying loan repayment. Before a student loan is deferred, students must meet a certain criteria. Not all student loans are eligible for deferment so you will have to check with your lender on your specific situation. Some reasons for student loan deferment may include continuing student education, unemployment, financial hardships, illness, military duty, etc…
What is the Difference between Federal Student Loan Forbearance and Loan Forgiveness?
Student loan forgiveness, or student loan cancellation involves having 100%, or a portion of the student loan debt forgiven. To qualify, students must meet loan forgiveness requirements. For example, teachers may qualify for loan forgiveness under certain circumstances.
Federal student loan forbearance is a temporary pause or reduction in loan payments granted by the U.S. Department of Education to borrowers who are experiencing financial hardship or other qualifying circumstances. Here’s an extensive overview of federal student loan forbearance:
Eligibility for Federal Student Loan Forbearance:
Financial Hardship: Borrowers experiencing financial difficulties, such as unemployment, underemployment, or significant medical expenses, may qualify for forbearance.
Medical or Dental Internship/Residency: Medical or dental interns or residents may be eligible for forbearance if they meet specific criteria.
Teacher Loan Forgiveness Service: Borrowers who are eligible for Teacher Loan Forgiveness and meet certain other requirements may qualify for forbearance.
AmeriCorps Service: Borrowers who are serving in AmeriCorps and are unable to make loan payments may be eligible for forbearance.
National Guard Duty: Borrowers who are members of the National Guard and are activated in response to a national emergency may qualify for forbearance.
Types of Federal Student Loan Forbearance:
General Forbearance: This type of forbearance is available for borrowers who are experiencing financial hardship or other reasons that make them unable to make their regular loan payments.
Mandatory Forbearance: Federal law requires loan servicers to grant forbearance in certain situations, such as if the borrower is serving in a medical or dental internship/residency, is a member of the National Guard activated in response to a national emergency, or is eligible for Teacher Loan Forgiveness.
Discretionary Forbearance: Loan servicers may grant discretionary forbearance to borrowers who do not qualify for mandatory forbearance but are experiencing financial hardship or other temporary difficulties.
Key Features of Federal Student Loan Forbearance:
Temporary Relief: Forbearance provides temporary relief from making student loan payments, typically for a period of up to 12 months at a time.
Accrued Interest: Interest continues to accrue on the loan during the forbearance period, regardless of the type of forbearance granted.
Application Process: Borrowers must apply for forbearance through their loan servicer and provide documentation to support their request.
Limited Duration: Forbearance is typically granted for a limited period, and borrowers must reapply if they need additional forbearance beyond the initial period.
Impact on Loan Repayment: Forbearance may extend the overall repayment period of the loan, resulting in higher total interest costs over time.
Alternative Repayment Options: Borrowers should explore alternative repayment options, such as income-driven repayment plans or loan consolidation, before applying for forbearance.
Considerations Before Requesting Forbearance:
Interest Capitalization: Any unpaid interest that accrues during forbearance may be capitalized, meaning it will be added to the principal balance of the loan, increasing the total amount owed.
Long-Term Impact: Forbearance may provide short-term relief but could result in higher overall loan costs and a longer repayment period.
Exploring Alternatives: Borrowers should consider alternative options, such as income-driven repayment plans or deferment, before requesting forbearance.
Communicate with Loan Servicer: It’s essential to communicate with your loan servicer to discuss your options and determine the best course of action based on your individual circumstances.
Federal student loan forbearance can provide temporary relief for borrowers facing financial difficulties, but it’s essential to carefully consider the implications and explore alternative repayment options before requesting forbearance.
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