When Times Get Tough: Understanding Student Loan Forbearance

Every discussion about student loans seems to emphasize the importance of making your loan payments on time every month. You'll hear again and again about the dire consequences of not honoring your loan commitment, which can be intimidating to students unfamiliar with managing personal debt. You may start to wonder whether making late payments or skipping a payment will permanently ruin your once sterling credit score, or result in a seizure of personal property in order to settle a debt.

It's true than assuming student loans is a serious financial responsibility, maybe even the first such responsibility you've ever taken on by yourself, but you must not let your college planning fall victim to unnecessary fear. One key to eventual successful repayment of student loan debt is to do your contingency planning ahead of time. You must map different possible scenarios for your borrowing and repayment, so you will know exactly what to do in case your experience after graduation is not exactly what you hoped it would be... and usually it is not quite as easy as you'd expected to build a new post-collegiate life, but that is such a common experience it's no reason at all to worry. If you know what alternative repayment schedules are available to you before the inevitable times of tight cash flow occur, you'll be able to transition smoothly into paying off your debt more gradually should the need arise.

Of course it would be ideal to make your payments on time, every time. And yes, there are serious consequences if you continually skip payments. However, as a borrower, you do have options in seeking alterations in the terms of your loan. If you have fallen into a financial slump in which your current earnings simply don't bring in enough money to cover all of your expenses, you should seriously consider requesting a forbearance on your student loan.

What Is A Student Loan Forbearance?

You can apply for a student loan forbearance when your regular monthly loan payments are just too much to handle. Like loan deferment, loan forbearance allows you to suspend your monthly payments on your student loan for a period of time (often one year). A loan forbearance lets you take a break from the strict terms of repayment without incurring any penalty.

However, your regular interest charges will continue to be added to your total amount due. That means if you do not make arrangements to pay the interest during the forbearance period, the amount of your debt increases. Forbearances can result in paying the interest on your loan each month and nothing else toward the principal. That is not a desirable situation, but it does help you keep your loan open without suffering any negative consequences like blemished credit.

How Can A Student Loan Forbearance Benefit Me?

A student loan forbearance can help you avoid going into default on your student loan. Let's say you started out being able to afford your monthly loan payment, but then one day you lost your job. When you find a new job, it does not pay as well as the old one. Suddenly you can't afford to pay the same amount you used to pay when you had a larger salary.

That's where a student loan forbearance can come in handy. You will be allowed to stop your monthly payments temporarily while interest keeps accruing on your loan, so you can continue to pay your other bills on time and stay in good financial standing. Likewise, a student loan forbearance also gives you time to find additional sources of income so you can get back on your feet.

How Can I Apply For A Student Loan Forbearance?

You can apply for a student loan forbearance through your lender. Please note that not all student loan forbearances are granted, and your application will be evaluated in order to determine if you really need the forbearance. For instance, if you show extreme financial hardship, you will most likely qualify. However, other circumstances can cause you to qualify as well, such as familial problems.

Usually student loan forbearances can be obtained in 12-month installments, but for no more than three years total. It is generally believed that in this period of time you will be able to make adjustments to your life that will make paying your original loan bill on time each month a feasible option. That is your eventual goal.

Remember, student loan forbearance is here to help you. Even though it may extend the amount of time you'll have to pay off your loan as well as increase the amount of the loan itself, you won't suffer the calamity of default. And if forbearance doesn't work for you, you may also request a loan deferment, which is another convenient option should your finances temporarily get out of hand.