Students who are experiencing financial difficulty and are unable to make scheduled payments on their student loans may be eligible for a forbearance, a temporary suspension or reduction in student loan payments. Be aware that the forbearance period does not decrease your total repayment period. If your original repayment period is 10 years and you are granted a two year forbearance, your repayment period is not decreased to eight years. Your repayment period remains 10 years.
To be granted a forbearance, you must contact your holder and submit a written request to apply. Your holder is willing to work with students who are experiencing financial hardship. For this reason, it is important to maintain good communication with your holder. Applying for and being granted forbearance does not reflect adversely on your credit report, but will help you avoid delinquency and default. Forbearance may be viewed as a cash management tool for those with cash flow problems or other cash flow needs. You are eligible for a mandatory forbearance on your federal Stafford loans throughout the duration of your residency if you either a) do not qualify for a deferment or b) have used up your deferment eligibility.
Interest Payments During Forbearance
During a forbearance, interest will continue to accrue on your loan. You may have to pay the interest immediately when due, or it may be capitalized (added), to your loan. Either way, forbearance is a costly option. The interest on your loans continues to accumulate throughout the forbearance period therefore increasing the total debt amount of your student loan and your monthly payment when the forbearance period expires.
The primary difference between deferment and forbearance is that during deferment, no interest accrues on Subsidized loans but during forbearance, interest does accrue on Subsidized loans. For Unsubsidized loans, deferment and forbearance are essentially the same - interest accrues either way. During forbearance, interest accrues on all loans.
You, the borrower, must make arrangements for the payment of interest. If, however, you are unable to pay the accruing interest, holders may offer you the option of interest capitalization. With your consent, this option permits the holder to add the accruing interest to the principal balance. If you choose this alternative, be aware that capitalization increases the amount of money that you must ultimately repay because the interest is added to the loan’s principal balance. Forbearance of both principal and interest (if you so request) must be granted by a holder. Such a forbearance can be expected to last throughout the remaining residency period, but will need to be renewed annually.
When forbearance involves the postponement of both principal and interest, the holder must contact you either by telephone or in writing at least once every three months to remind you of your outstanding obligation to repay.
Applying for Forbearance
- Contact your holder(s) to obtain the required application form(s)
- Your request for forbearance must be in writing and the forbearance agreement must be signed by both you and an authorized official of the holder
- No administrative or other fee may be charged for forbearance
- No adverse information may be reported to credit bureaus solely because of the granting of forbearance
- Lenders are mandated to approve a written forbearance request to anyone enrolled in a residency program. This request must be renewed annually
- A borrower granted forbearance must be given the option of temporary cessation of payments
*Please note: All terms in bold/italic appear on our Glossary page.