The Student Loan Forbearance Guide – Is it worth it?

There are a number of students who have taken student loans and are repaying it. But have you ever heard of deferment or loan forbearance? Do you think that putting your loan in to forbearance is worthy? So let us go through the pros and cons of the loan forbearance so that you could understand it well.

Loan Forbearance is an action in which you stop paying your debt payment for a limited period of time or you can reduce the amount of money that you are repaying. This is mostly allowed with a federal student loan but in case of private loan it depends upon the company whether they allow the deferment period or not. As it is most common with federal student loans so we will discuss that in detail. Let’s start,


What is the Difference between Loan Deferment and Loan Forbearance?

There is a slight difference between loan forbearance and loan deferment that you must know. When you apply for a loan forbearance, you will not have to pay your monthly payments but you will still have to pay the interest only payments till the forbearance period ends. Otherwise the interest payments will be added in to your total amount of debt. You can get a loan forbearance for almost all kind of student loans.

In the case of deferment, you are sometimes allowed to not to pay anything even the interest amount. This does not happens in all cases, and in some cases of deferment you still have to pay the interest amount only. To get a deferment on your student loan, you need to have a federal loan and it is only allowed in some types of federal loans such as subsidized loans or Perkins loans.

So in the case of Loan Forbearance and some cases of deferment, you will still have to pay some amount of money, so you should keep that in mind.


Types of Loan Forbearance

Loan forbearance is of two types and generally there are of two types. First is the General Forbearance and the second is the Mandatory Forbearance. Both has its own rules, so it is better to be aware of,


General Forbearance

The first type of loan forbearance is general loan forbearance. In this case, you apply for the loan forbearance program if you fulfill certain requirements and then it is the loan provider company which decides whether you would get approved or not. It is all on the lender to decide and in this case you also need to fulfil some requirement. These requirements are that you should be having financial issues so that you are unable to pay the loan payments. Secondly, if the borrower has changed his or her job or the borrower has faced some medical problems.

In a general forbearance program, it is up to the wish of the lender to approve you or not and if you want to ask for this service, you need to contact your lender for further details. The company can also provide loan forbearance if there is any natural disaster.

You can only qualify for a general loan forbearance if you have a Perkins Loans, Direct Loans or a FFEL Loan. With these types of loans, you can get a loan forbearance for up to a time period of 1 year. You can also reapply for the loan forbearance if you still fulfill the requirements. With Perkins Loans, you can get a loan forbearance for a time period up to 3 years. While if you have taken a direct loan or a FFEL loan, then there is no limit for the time period of your loan forbearance.

The procedure of getting a loan forbearance differs company by company thus you can contact your service provider, if you fulfil the requirements of the program to get approved.


Mandatory Loan Forbearance

The second type of loan forbearance is mandatory forbearance. In this case, if you fulfill the requirements than it is mandatory to the loan service provider to grant you loan forbearance. This type of loan forbearance is provided to those people whom student loan payment is more than 20% of their monthly income. You can get this type of loan forbearance if you are teaching and there is teacher’s loan forgiveness program for that position, if you are in a medical or dental program, if you are a National Guard current employ that is not eligible for military deferment, if you are a current member of Americorps for which you had received National Award or if you qualify for the U.S. Department of Defense Student Loan Repayment Program.

This type of loan is offered on wider options and you can apply for that easily. You will get approved if you fulfill the requirements and the company is ought to do that. In the case of Mandatory forbearance, you can only get one year of forbearance period at a single time. After that 1 year passes and you still fulfill the requirements then you can reapply for the loan forbearance again. This process will continue till you are eligible for the program and you can apply again and again after the 12 month forbearance period ends.


Is Forbearance Worthy For You?

This is the question that you need to ask yourself before you apply for a loan forbearance program because there are advantages and disadvantages of loan forbearance. Sometimes it is good to get a forbearance but you are increasing your time to pay the loan that will increase the amount of interest that you have to pay.

When you want to apply for a forbearance, ask yourself a question that whether do you really need this or is there any other solution for this? Loan forbearance is not a permanent solution to your problems so if you are facing temporary issues that you can take care off in the future then you should look for this solution, otherwise you should look for other solutions.

To explain this, let me give you an example, suppose if you are area is facing a natural disaster and you are also a victim of this, then this could be a better solution. But if you are facing an issue of your job like you cannot find a job with a sufficient income and you are not able to pay the loan payments then loan forbearance may not be a good solution for this. If you have a medical issue that stops you from doing two jobs at a time or if you have any kind of financial issues then you should not consider loan forbearance on the first priority. I will tell you about some of the ideas that can help you in this regard,


Recheck your budget

If you are facing financial issues, then you should try the Challenge Everything budget. This budget will help you to cut any useless expenses. Go through your budget and find anything that you can cancel, like there are memberships that you are not using, so you should cancel it out. For example, you can cancel your gym membership or your cable TV subscriptions because there are free alternatives for them that you can use.


Consolidate your Student Loan

One of the best way to save money on student loan is to refinance your student loans. Refinancing your loan can help you to pay a lower monthly payment and a lower interest rate. This could be a benefit you a lot. There are many online companies and banks that can help you get a lower interest rate than the one you are already paying. This simple trick will help you to repay your loan faster than you have thought and you can be soon debt free.


Bring-in Extra Income

If less income is the only issue then you should try to find other resources through which you can earn extra money. Bring-in extra income every month can help you in many ways and you can pay your debt on time. The best thing about these side hustles is that there is no limitation in many of these and you can work whenever you want. You can also take more than one side hustle at a time.

Side Hustles are easy to do, if you have a car, you can drive it Lyft or Uber to make a living. These companies provide you a platform where you can work according to your own schedule and convenience. If you do not want to work with these companies, you can also use your car to deliver products with companies like Doordash or Amazon.

You can also freelance your service and skills in the free time you have and you can also start you own business in which you can work after your primary job. You can start as a baby sitter or a pet setter or even by walking dogs.



So these are the pros and cons of loan forbearance and deferment that you should know. Now you would be able to find an appropriate solution, if you are facing issue in paying your loan payments. Do comment in the section below and let us know if you have any queries regarding the solution because we would love to hear from you.

Posted on: 11/16/2020

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