One of the scariest things about having student loan debt is the idea that you might not be able to make your payments at some point. What would you do if you lost your job or a medical condition put a strain on your budget? How would you be able to make loan payments and avoid going into student loan default?
When you face financial hardship, one of your options might be student loan forbearance. If you can work out a forbearance agreement for your federal student loans, you could get breathing room until you’re back on your feet.
But there are pros and cons to forbearance, and it’s not the best option in every circumstance. Read on to learn more about student loan forbearance and decide if it’s right for you.
What is forbearance?
Forbearance is a protection offered by Federal Student Aid for federal student loans, such as Direct Subsidized or Unsubsidized Loans. Some private lenders might offer short-term forbearance for private student loans, but this is up to the discretion of the lender.
When you put your federal student loans into forbearance, you postpone your monthly payments. Normally, if you stopped paying your loans, they would go into student loan default. Defaulting on federal student loans can drag down your credit score and lead to wage garnishment.
But if you get approved for forbearance, you can stop paying your federal student loans for up to 12 months without penalty. Interest will continue to accrue on your loans, meaning you’ll be facing an even larger debt when you resume repayment.
But that pause in monthly bills might give you the time you need to improve your financial situation. Of course, you first have to get approved for student loan forbearance, which is easier in some cases than in others.
Getting approved for student loan forbearance
If you’re struggling to keep up with student loan bills, you might be ready to pause your payments. You’ll need to get that approved by your student loan servicer by making a forbearance request. Your request might fall under one of two categories: general or mandatory forbearance.
You would request general, also called discretionary, forbearance if you’ve run into financial trouble, encountered unexpected medical expenses, lost your job, or are dealing with another similar challenge.
Your loan servicer will decide whether to approve your request. If it does, you could have your payments paused for up to 12 months at a time. If you’re not able to pay after this period is up, you could apply for forbearance again.
If you qualify for mandatory forbearance, however, your loan servicer is required to grant your request. You could be eligible if any of the following apply to you:
- You’re completing a dental or medical internship or residency and have an eligible loan.
- You’re serving in AmeriCorps and have an eligible loan.
- You’re activated as a member of the National Guard but don’t meet the requirements for military deferment.
- You’re teaching in a capacity that could qualify you for teacher loan forgiveness.
- Your monthly payments for all student loans have been at least 20 percent of your gross monthly income for up to three years.
Before you ask about student loan forbearance, it might make sense to see if you qualify for deferment instead. Deferment can be a better option than forbearance since it doesn’t require you to pay any interest that accrues on Direct Subsidized Loans or some other types of loans.
But you can only qualify if you meet certain criteria, such as going back to school or serving on active duty in the military. If you don’t meet the requirements for deferment, you could consider forbearance instead. But first make sure you’ve explored all your options since there could be other strategies for getting your student loans under control.
Is student loan forbearance the right choice for you?
Although pausing payments through forbearance could bring you the financial relief you need, it’s only a temporary solution. Eventually, you’ll need to resume payments, and your student loan debt will be even bigger than when you started the period of forbearance.
Instead of pausing payments, another potential option is to reduce your monthly payments by applying for one of the following student loan repayment plans:
- Income-driven repayment, which adjusts your monthly payments along with your income and extends your repayment terms to 20 or 25 years. Income-driven plans include Income-Based Repayment, Pay As You Earn, Revised Pay As You Earn, and Income-Contingent Repayment. If you still have a balance after your term is up, the rest will be forgiven.
- Extended Repayment Plan, which lengthens your term to up to 25 years and has you pay a fixed or graduated amount from month to month.
- Graduated Repayment Plan, which lowers your monthly payments now and gradually increases them over a 10-year term.
Adjusting your payments with one of these plans could make it easier for you to continue repayment and avoid default. Since they don’t involve pausing payments, you won’t have to deal with as much ballooning interest as you might with forbearance.
Whatever you decide to do with your student loans, make sure to weigh your options before you take action. That way, you can determine the approach that will benefit you the most in the long run.
Know your options when you can’t pay your debt
Understanding your options is crucial if you’re having difficulty paying off your student loan debt. If you know your problems will only last a few months, student loan forbearance can make sense. It gives you a chance to stabilize your situation and reduce your money-related stress.
But if it looks like it might take longer to resolve your financial issues, you might consider other solutions. And if you have private student loans, you’ll have to speak with your student loan servicer to find a solution. You might have the option to pause payments while you fix your finances, but you’ll have to contact your particular lender to find out.
No matter your situation, though, speak with your loan servicer to review your options and work out a student loan repayment plan that will give you the best chance of moving forward.
Interested in refinancing student loans?
Here are the top 8 lenders of 2020!| Lender | Variable APR | Eligible Degrees | |
|---|---|---|---|
| Check out the testimonials and our in-depth reviews! 1 Important Disclosures for Earnest. Earnest DisclosuresTo qualify, you must be a U.S. citizen or possess a 10-year (non-conditional) Permanent Resident Card, reside in a state Earnest lends in, and satisfy our minimum eligibility criteria. You may find more information on loan eligibility here: https://www.earnest.com/eligibility. Not all applicants will be approved for a loan, and not all applicants will qualify for the lowest rate. Approval and interest rate depend on the review of a complete application. Earnest fixed rate loan rates range from 3.20% APR (with Auto Pay) to 6.99% APR (with Auto Pay). Variable rate loan rates range from 1.99% APR (with Auto Pay) to 6.89% APR (with Auto Pay). For variable rate loans, although the interest rate will vary after you are approved, the interest rate will never exceed 8.95% for loan terms 10 years or less. For loan terms of 10 years to 15 years, the interest rate will never exceed 9.95%. For loan terms over 15 years, the interest rate will never exceed 11.95% (the maximum rates for these loans). Earnest variable interest rate loans are based on a publicly available index, the one month London Interbank Offered Rate (LIBOR). Your rate will be calculated each month by adding a margin between 1.82% and 5.50% to the one month LIBOR. The rate will not increase more than once per month. Earnest rate ranges are current as of December 13, 2019, and are subject to change based on market conditions and borrower eligibility. Auto Pay discount: If you make monthly principal and interest payments by an automatic, monthly deduction from a savings or checking account, your rate will be reduced by one quarter of one percent (0.25%) for so long as you continue to make automatic, electronic monthly payments. This benefit is suspended during periods of deferment and forbearance. The information provided on this page is updated as of 12/13/2019. Earnest reserves the right to change, pause, or terminate product offerings at any time without notice. Earnest loans are originated by Earnest Operations LLC. California Finance Lender License 6054788. NMLS # 1204917. Earnest Operations LLC is located at 302 2nd Street, Suite 401N, San Francisco, CA 94107. Terms and Conditions apply. Visit https://www.earnest.com/terms-of-service, email us at hello@earnest.com, or call 888-601-2801 for more information on our student loan refinance product. © 2018 Earnest LLC. All rights reserved. Earnest LLC and its subsidiaries, including Earnest Operations LLC, are not sponsored by or agencies of the United States of America. 2 Important Disclosures for SoFi. SoFi Disclosures
3 Important Disclosures for Figure. Figure DisclosuresFigure’s Student Refinance Loan is a private loan. If you refinance federal loans, you forfeit certain flexible repayment options associated with those loans. If you expect to incur financial hardship that would impact your ability to repay, you should consider federal consolidation alternatives. 4 Important Disclosures for College Ave. College Ave DisclosuresCollege Ave Student Loans products are made available through either Firstrust Bank, member FDIC or M.Y. Safra Bank, FSB, member FDIC. All loans are subject to individual approval and adherence to underwriting guidelines. Program restrictions, other terms, and conditions apply. 1College Ave Refi Education loans are not currently available to residents of Maine. 2All rates shown include autopay discount. The 0.25% auto-pay interest rate reduction applies as long as a valid bank account is designated for required monthly payments. Variable rates may increase after consummation. 3$5,000 is the minimum requirement to refinance. The maximum loan amount is $300,000 for those with medical, dental, pharmacy or veterinary doctorate degrees, and $150,000 for all other undergraduate or graduate degrees. 4This informational repayment example uses typical loan terms for a refi borrower with a Full Principal & Interest Repayment and a 10-year repayment term, has a $40,000 loan and a 5.5% Annual Percentage Rate (“APR”): 120 monthly payments of $434.11 while in the repayment period, for a total amount of payments of $52,092.61. Loans will never have a full principal and interest monthly payment of less than $50. Your actual rates and repayment terms may vary. Information advertised valid as of 1/1/2020. Variable interest rates may increase after consummation. 5 Important Disclosures for Laurel Road. Laurel Road DisclosuresLaurel Road is a brand of KeyBank National Association offering online lending products in all 50 U.S. states, Washington, D.C., and Puerto Rico. Mortgage lending is not offered in Puerto Rico. All loans are provided by KeyBank National Association. ANNUAL PERCENTAGE RATE (“APR”) FEE INFORMATION There are no origination fees or prepayment penalties associated with the loan. Lender may assess a late fee if any part of a payment is not received within 15 days of the payment due date. Any late fee assessed shall not exceed 5% of the late payment or $28, whichever is less. A borrower may be charged $20 for any payment (including a check or an electronic payment) that is returned unpaid due to non-sufficient funds (NSF) or a closed account. LOAN AMOUNT For bachelor’s degrees and higher, up to 100% of outstanding private and federal student loans (minimum $5,000) are eligible for refinancing. If you are refinancing greater than $300,000 in student loan debt, Lender may refinance the loans into 2 or more new loans. ELIGIBILITY & ELIGIBLE LOANS Borrower, and Co-signer if applicable, must be a U.S. Citizen or Permanent Resident with a valid I-551 card (which must show a minimum of 10 years between “Resident Since” date and “Card Expires” date or has no expiration date); state that they are of at least borrowing age in the state of residence at the time of application; and meet Lender underwriting criteria (including, for example, employment, debt-to-income, disposable income, and credit history requirements). Graduates may refinance any unsubsidized or subsidized Federal or private student loan that was used exclusively for qualified higher education expenses (as defined in 26 USC Section 221) at an accredited U.S. undergraduate or graduate school. Any federal loans refinanced with Lender are private loans and do not have the same repayment options that federal loan program offers such as Income Based Repayment or Income Contingent Repayment. All loans must be in grace or repayment status and cannot be in default. Borrower must have graduated or be enrolled in good standing in the final term preceding graduation from an accredited Title IV U.S. school and must be employed, or have an eligible offer of employment. Parents looking to refinance loans taken out on behalf of a child should refer to https://www.laurelroad.com/refinance-student-loans/refinance-parent-plus-loans/ for applicable terms and conditions. For Associates Degrees: Only associates degrees earned in one of the following are eligible for refinancing: Cardiovascular Technologist (CVT); Dental Hygiene; Diagnostic Medical Sonography; EMT/Paramedics; Nuclear Technician; Nursing; Occupational Therapy Assistant; Pharmacy Technician; Physical Therapy Assistant; Radiation Therapy; Radiologic/MRI Technologist; Respiratory Therapy; or Surgical Technologist. To refinance an Associates degree, a borrower must also either be currently enrolled and in the final term of an associate degree program at a Title IV eligible school with an offer of employment in the same field in which they will receive an eligible associate degree OR have graduated from a school that is Title IV eligible with an eligible associate and have been employed, for a minimum of 12 months, in the same field of study of the associate degree earned. INTEREST RATES The interest rate you are offered will depend on your credit profile, income, and total debt payments as well as your choice of fixed or variable and choice of term. For applicants who are currently medical or dental residents, your rate offer may also vary depending on whether you have secured employment for after residency. DISBURSEMENT OPTIONS The repayment of any refinanced student loan will commence (1) immediately after disbursement by us, or (2) after any grace or in-school deferment period, existing prior to refinancing and/or consolidation with us, has expired. POSTPONING OR REDUCING PAYMENTS After loan disbursement, if a borrower documents a qualifying economic hardship, we may agree in our discretion to allow for full or partial forbearance of payments for one or more 3-month time periods (not to exceed 12 months in the aggregate during the term of your loan), provided that we receive acceptable documentation (including updating documentation) of the nature and expected duration of the borrower’s economic hardship. We may agree under certain circumstances to allow a borrower to make $100/month payments for a period of time immediately after loan disbursement if the borrower is employed full-time as an intern, resident, or similar postgraduate trainee at the time of loan disbursement. These payments may not be enough to cover all of the interest that accrues on the loan. Unpaid accrued interest will be added to your loan and monthly payments of principal and interest will begin when the post-graduate training program ends. We may agree under certain circumstances to allow postponement (deferral) of monthly payments of principal and interest for a period of time immediately following loan disbursement (not to exceed 6 months after the borrower’s graduation with an eligible degree), if the borrower is an eligible student in the borrower’s final term at the time of loan disbursement or graduated less than 6 months before loan disbursement, and has accepted an offer of (or has already begun) full-time employment. If Lender agrees (in its sole discretion) to postpone or reduce any monthly payment(s) for a period of time, interest on the loan will continue to accrue for each day principal is owed. Although the borrower might not be required to make payments during such a period, the borrower may continue to make payments during such a period. Making payments, or paying some of the interest, will reduce the total amount that will be required to be paid over the life of the loan. Interest not paid during any period when Lender has agreed to postpone or reduce any monthly payment will be added to the principal balance through capitalization (compounding) at the end of such a period, one month before the borrower is required to resume making regular monthly payments. KEYBANK NATIONAL ASSOCIATION RESERVES THE RIGHT TO MODIFY OR DISCONTINUE PRODUCTS AND BENEFITS AT ANY TIME WITHOUT NOTICE. This information is current as of November 8, 2019 and is subject to change. 6 Important Disclosures for Splash Financial. Splash Financial DisclosuresTerms and Conditions apply. Splash reserves the right to modify or discontinue products and benefits at any time without notice. Rates and terms are also subject to change at any time without notice. Offers are subject to credit approval. To qualify, a borrower must be a U.S. citizen or permanent resident in an eligible state and meet applicable underwriting requirements. Not all borrowers receive the lowest rate. Lowest rates are reserved for the highest qualified borrowers. 7 Important Disclosures for CommonBond. CommonBond DisclosuresOffered terms are subject to change. Loans are offered by CommonBond Lending, LLC (NMLS # 1175900). If you are approved for a loan, the interest rate offered will depend on your credit profile, your application, the loan term selected and will be within the ranges of rates shown. All Annual Percentage Rates (APRs) displayed assume borrowers enroll in auto pay and account for the 0.25% reduction in interest rate. All variable rates are based on a 1-month LIBOR assumption of 1.76% effective November 10, 2019. 8 Important Disclosures for LendKey. LendKey DisclosuresRefinancing via LendKey.com is only available for applicants with qualified private education loans from an eligible institution. Loans that were used for exam preparation classes, including, but not limited to, loans for LSAT, MCAT, GMAT, and GRE preparation, are not eligible for refinancing with a lender via LendKey.com. If you currently have any of these exam preparation loans, you should not include them in an application to refinance your student loans on this website. Applicants must be either U.S. citizens or Permanent Residents in an eligible state to qualify for a loan. Certain membership requirements (including the opening of a share account and any applicable association fees in connection with membership) may apply in the event that an applicant wishes to accept a loan offer from a credit union lender. Lenders participating on LendKey.com reserve the right to modify or discontinue the products, terms, and benefits offered on this website at any time without notice. LendKey Technologies, Inc. is not affiliated with, nor does it endorse, any educational institution. Subject to floor rate and may require the automatic payments be made from a checking or savings account with the lender. The rate reduction will be removed and the rate will be increased by 0.25% upon any cancellation or failed collection attempt of the automatic payment and will be suspended during any period of deferment or forbearance. As a result, during the forbearance or suspension period, and/or if the automatic payment is canceled, any increase will take the form of higher payments. The lowest advertised variable APR is only available for loan terms of 5 years and is reserved for applicants with FICO scores of at least 810. As of 12/019/2019 student loan refinancing rates range from 1.90% to 8.59% Variable APR with AutoPay and 3.49% to 7.75% Fixed APR with AutoPay. |
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 | 1.99% – 6.89%1 | Undergrad & Graduate | |
 | 2.31% – 7.36%2 | Undergrad & Graduate | |
 | 2.06% – 6.81%3 | Undergrad & Graduate | |
 | 2.62% – 6.12%4 | Undergrad & Graduate | |
 | 2.29% – 6.65%5 | Undergrad & Graduate | |
 | 1.99% – 7.06%6 | Undergrad & Graduate | |
 | 1.81% – 6.29%7 | Undergrad & Graduate | |
 | 1.90% – 8.59%8 | Undergrad & Graduate | |
