If you are considering forbearance as a means of relieving your student loans for a time, rest assured that you will not hurt your credit score. Many borrowers miss a few payments or otherwise fall behind in their student loan payments before applying for forbearance. If this happens to you, those actions will affect your credit score. Because the forbearance is agreed upon by all parties, your credit score will reflect your student loan account as current.
It is far better to explore any and all student loan payment options before letting an account get behind or default. Defaulted student loans make it very difficult to obtain any other form of credit. Federal student loans can seize your federal tax return in default, in addition to garnishing wages and taking other collection action.
One of the biggest strengths of having a federal student loan in the first place is that the wide variety of repayment plans and temporary relief programs help you avoid credit action. Student loan debt can seem overwhelming, but the worst thing you can do is ignore it. Specific policies might vary lender to lender, but getting qualified for a repayment plan that you can manage is the best thing you can do for your student loans.
There are many avenues you could travel when your student loans begin to get out of control. If possible, begin by examining options for deferring your loans, which subsidizes the interest during the deferral period. If you cannot qualify for a deferment, there are still more options prior to reaching forbearance. Many federal student loan programs will base your payment on your income. If lowering your payment will allow you to resume making regular payments, then at least you’ll be making some progress on your loans. While loans sit in forbearance, interest continues to build and the loan grows.
Deferment can be granted for economic hardship, unemployment, or because the borrower enrolled in school. If any of these situations apply to you, explore deferment before applying for a forbearance.
When you are granted a forbearance or deferment due to economic hardship, that period can last up to 12 months before you’ll need to renew it. Renewal is fairly simple, although you may be required to provide documentation that your hardship continues to exist. A loan can be deferred for up to three years.