No one takes out student loans thinking that they’re going to have a hard time paying them back. We all imagine getting great high flying jobs right after we graduate and rolling in dough. But what happens when things don’t go as planned?
You might encounter a family emergency or health issue. You might be doing a medical or dental internship. What do you do then? There are some issues that you would be able to get an official deferment for. Deferments are great because they can last up to 3 years in some cases (or more if you get a deferment for going back to school) while you’re serving the military or in the community. For certain federal loans, your interest even gets paid by the government during periods of deferment. You may not be so lucky when it comes to private student loans. To find out more about deferments, read this post.
Student loan forbearance is similar but involves different criteria to qualify and interest accumulates while you’re not making payments whether you get forbearance for a federal or private loan. Currently, around 10% of federal student loans are in forbearance. Not all private loans offer forbearance and the criteria they use to determine eligibility for forbearance varies depending on your lender. For information on their forbearance policies, it’s best to contact your lender. In this post, I will give you a general overview of forbearance policies for federal loans some of which will be similar to private student loans. You can also check out this article about how it affects credit score.
Student Loan Forbearance Defined:
For situations that don’t qualify for deferment, forbearance is a great option. It’s when you’re given a period of up to 12 months in which you either don’t have to make payments or you’re allowed to make lower monthly payments.
Qualifying for Forbearance:
- Poor health
- Medical or dental internship or residency
- Personal problems you could not forsee
- Financial hardship
- Monthly payments for all federal loans equal 20% of your income
- You’re serving in AmeriCorps
- You’re teaching in a position that qualifies you for the Teacher Loan Forgiveness Program
- You’re eligible because of military service.
How to Apply:
For federal student loan forbearance, there is an application that you must fill out. It’s also important that you don’t stop paying your loans until you have been officially approved unless you have been told to do otherwise. Not making a payment could jeopardize your chance of approval for this program. In certain circumstances, you might be eligible for forbearance even if you’ve defaulted on your loans.