What Is Federal Student Loan Forbearance?

Sara Lindberg Updated on January 2, 2018

Have you faced a financial hardship lately that’s preventing you from making payments on your student loan?

If you’re struggling to stay current on your monthly payment  or you’ve fallen several months behind, forbearance and deferment are two terms you need to know more about.

NSLU-article-title-bg-should-i-consolidate.jpg

What’s the difference between forbearance and deferment?

Forbearance and deferment are sometimes used interchangeably, but the two terms (and what they represent) are drastically different.

The most notable difference is that with a deferment, you may not be responsible for paying the interest that accrues on certain types of loans during the deferment period.

This is the exact opposite of forbearance, where the interest accrues while your loan is put on hold and you are responsible for paying the interest.

So, what exactly are these two loan “hold” programs?

Federal student loan deferment

Deferent allows you to temporarily postpone payments on a loan under certain circumstances. During a deferment, interest generally doesn’t accrue on Direct Subsidized Loans, the subsidized portion of Direct Consolation Loans, Subsidized Federal Stafford Loans, the subsidized portion of Federal Family Education Loans (FFEL) Consolidation Loans, and Federal Perkins Loans.

If you’re enrolled in an eligible college or career school at least half-time, in most cases, your loan will be placed into a deferment automatically, and your loan servicer will notify you that the deferment has been granted.

You may also be eligible for deferment based on other circumstances as defined on the Federal Student Aid website. This includes things such as:

  • Being unemployed or unable to find full-time employment (for up to three years)
  • Being enrolled in an approved graduate fellowship program
  • Experiencing economic hardship,
  • Serving in the Peace Corps (for up to three years), or
  • Being in active duty military service in connection with a war, military operation, or national emergency.

 If you don’t meet the qualifications for a deferment, you might be eligible for a forbearance.

Imagine Life Without a Student Loan Payment... Start Saving Now!

Federal student loan forbearance

Like deferment, forbearance temporarily relieves your obligation to make payments on a student loan. However, a forbearance has some very important differences from a deferment.

Lenders may grant you a forbearance if you’re facing a financial hardship, such as a serious medical issue that leaves you unable to work.

During forbearance, your regular loan payments are temporarily reduced or put on pause. However, it’s important to note that even though your principal payments are postponed while the loan is in forbearance, the interest on the principal continues to accrue.

So what’s the problem with that?

Well, this build-up of interest—otherwise known as capitalization—occurs when you miss interest payments, or in this case, have your payment placed on hold. While the loan itself is on hold, the unpaid interest gets added monthly to the principal of the loan.

So, the next month, you’re charged interest on a higher principal amount, thus increasing the total amount owed.

The good news is, you can (and should) choose to make interest-only payments while your loan is in forbearance. This will help keep the principal at the same amount until you’re ready to start making payments again.

How do you request a forbearance? 

If you’re interested in a forbearance on your federal student loan, you will need to submit a request to your loan service provider.

You may also be asked to provide documentation to show that you meet the eligibility requirements.

Learn more about how to manage your student loan debt.

The information in this article pertains to federal student loan forbearance. Student loans from a state or a private lender will have different forbearance options. Learn more about private student loan forbearance.

Looking To Conquer Your Student Loan Debt?

Yes! Send Me The Savings Blueprint

Published in: Paying Off, Default

About the Author
Sara Lindberg

Sara Lindberg, B.S., M.Ed., is a freelance writer specializing in business, finance, health, and wellness. She holds a Bachelor's of Science degree in Exercise Science and a Master's Degree in Counseling. When she’s not writing, Sara can be found at the gym lifting weights, running the back roads to train for her next half-marathon, and spending time with her husband and two children. Read more by Sara Lindberg

Save Today With These Leading Lenders

#1 - Comet Recommended View More Details

Works with 275+ not-for-profit community lenders for higher approval chances

  • APR: 2.70% - 8.97%
  • Minimum credit score: 660
  • Refinance up to $300K
View More Details
Visit LendKey View Loan Disclosure

LendKey operates student loan programs for over 275 not-for-profit and community lenders across the country. By partnering with these lenders, LendKey is able to give consumers direct access to the best rates available from the most borrower friendly institutions. As the servicer of all loans obtained through its platform, you can rest easy knowing your personal information will be safe and that the best customer service team will be ready to answer your questions from application until your final payment.

LendKey Student Loan Refinance review

  • Lightning fast rate check - 2-minute rate check with no impact on your credit score
  • More lenders, more options - see the best offers from over 275 not-for-profit and community lenders for higher approval chances
  • Life of loan relationship - With LendKey, your personal information will never be sent or passed on to third parties. Their customer service team is with you from the moment you land on their website until you've completely repaid your loan.
  • Unmatched benefits- Community lenders put people over profits and offer unique benefits like cosigner release after 12 on-time payments, interest only repayment options to keep monthly payments low, the largest unemployment protection period in the market, and more.

Get a personalized quote from LendKey now.

#2 View More Details

Offers unemployment protection and career/coaching/networking

  • APR: 2.470% - 7.979%
  • Minimum credit score: 650
  • Refinance up to 100% of student debt
View More Details
Visit SoFi View Loan Disclosure

SoFi, which stands for “Social Finance,” was created by a group of Stanford business students who found themselves with a mountain of debt after graduation. They set out to change the student loan industry and help borrowers like themselves to get lower interest rates. SoFi has some of the lowest interest rates and, unlike the other lenders we reviewed, it has no maximum amount you can finance. However, Nevada residents can’t currently refinance with SoFi. Minimum loan balances are higher in Arizona, Massachusetts and Pennsylvania due to state laws. Additional state restrictions may apply.

SoFi Student Loan Refinancing Review

  • Low interest rates - For well-qualified borrowers, SoFi offers some of the lowest rates we have found.
  • Strong customer service - It has more than 350 customer service reps available to help applicants through process.
  • Career coaching and networking - Perks include career services representatives who can help you find a job or negotiate a higher salary. SoFi also hosts networking events, happy hours and educational lectures on topics like buying a home in major cities around the country.
  • Unemployment protection - Borrowers who lose their jobs through no fault of their own may apply for Unemployment Protection. If approved, SoFi will suspend their monthly SoFi loan payments and provide job placement assistance during the forbearance period. These benefits are offered in three month increments, and are capped at 12 months, in aggregate, over the life of the loan. Note that interest will still accrue while loans are in forbearance.

Find out what interest rate SoFi can offer you here.

#3 View More Details

For every loan they fund, they contribute to the education of a child in need

  • APR: 2.48% - 6.25%
  • Minimum credit score: 660
  • Refinance up to $500K
View More Details
Visit CommonBond View Loan Disclosure

CommonBond was founded in 2011 by three MBA graduates from the University of Pennsylvania’s Wharton School who wanted to help their peers escape from high-interest student loan debt. Its original focus was on grad students, but it has since expanded to cover undergrads as well.

Of all the companies we reviewed, CommonBond has some of the best customer service. The company prides itself on being easy to reach by email, phone, or live chat. It offers networking events, expert panels, insider newsletters, and even has a program help borrowers who lose their jobs to find new ones. CommonBond also makes you feel good about choosing to refinance with them by donating money to an education nonprofit for each loan they write.

CommonBond Student Loan Refinance review

  • Unemployment protections - If you lose your job or decide to go back to school, you can delay your payments for up to 24 months.
  • Social promise - For every loan they fund, they also contribute to the education of a child in need.
  • Hybrid loan option - Offerings include a 10-year hybrid loan with fixed interest for the first five years, and variable interest for the final five.
  • Referral bonus - For every friend you refer who refinances their loans with CommonBond, you’ll earn a $200 cash bonus.
  • Qualification - Borrowers must have graduated at least 2 years prior if they want to apply without a co-signer. And borrowers in 6 states – Idaho, Louisiana, Mississippi, Nevada, South Dakota, and Vermont – cannot currently refinance through CommonBond.

Get a personalized review of your refinancing options with CommonBond today.

#4 View More Details

Earnest empowers people with the financial captial they need to live better lives.

  • APR: 2.57% - 7.89%
  • Minimum credit score: 650
  • Refinance up to $500K
View More Details
Visit Earnest View Loan Disclosure

Using technology, data, and design to build affordable products, Earnest's lending products are built for a new generation seeking to reach life's milestones. The company understands every applicant's unique financial story to offer the lowest possible rates and radically flexible loan options for living life.

  • Commitment-free 2 minute rate check
  • Client Happiness can be reached via in app messaging, email, and phone 
  • No fees for origination, prepayment, or loan disbursement
  • Flexible terms let you pick your exact monthly payment or switch between fixed and variable rates
  • Skip a payment and make it up later
  • Online dashboard is designed to make it easy to apply for and manage your loan

Click here to apply with Earnest and to see how much you can save.

#5 View More Details

Operates in all 50 states; 2nd largest student loan refinancing lender

  • APR: 3.24% - 7.02%
  • Minimum credit score: 660
  • No refinancing amount maximum
View More Details
Visit Laurel Road View Loan Disclosure

Laurel Road is a national online lender with customers in all 50 states, the District of Columbia, and Puerto Rico. Many of our non-bank competitors are not able to lend in all 50 states.Laurel Road has grown to be the second largest player in the student loan refinancing space in large part because of our reputation as the go-to low rate provider.

Laurel Road Student Loan Refinance Review

  • National reach - Online lender that is available in all 50 US states, the District of Columbia and Puerto Rico.
  • No fees & the lowest rates in the space - Laurel Road is the most transparent about the rates they provide customers, and offer the lowest rates where it counts. Our customers will save more than $20,000 over the life of their loans on average. 
  • Customer service reputation - Laurel Road's customer service representatives are no rookies. With 19 years of experience on average, Laurel Road’s Customer Service team delivers an experience that is best in the industry. They work to build meaningful, life-long relationships with our valued customers to improve their overall financial wellness.
  • The stability & security of a bank - They are a division of Darien Rowayton Bank, a stable and secure FDIC-insured bank, regulated by the FDIC and the Connecticut Department of Banking.

Get your personalized, pre-approved rates in less than 5 minutes.

#6 View More Details

Special offers for medical resident and fellow refinance products

  • APR: 2.91% - 7.65%
  • Minimum credit score: 670 w/cosigner
  • Refinance up to $350K
View More Details
Visit Splash View Loan Disclosure

Splash Financial is a leader in student loan refinancing with new rates as low as 3.25% fixed APR which can save you tens of thousands of dollars over the life of your loans. No application or origination fees and no prepayment penalties. Splash Financial is in all 50 states and is intensely focused on customer service. Splash Financial is also one of the few companies that offers a great medical resident and fellow refinance product. You can check your rate with Splash in just minutes.

  • Low interest rates – especially for graduate students
  • No application or origination fees. No prepayment penalties.
  • Co-signer release program - you can apply for a cosigner release form your loan after 12 months of on-time payments
  • Specialty product for doctors in training with low monthly payment

Click here to see more of Splash's offerings and to see how you can save money.

Save on Your Student Loans
$
$
Article Topics

Looking To Conquer Your Student Loan Debt?

Yes! Send Me The Savings Blueprint

More Articles in Paying Off
The Best Companies To Refinance Your Student Loans Save Money Now
Additional Resources
Comments

"I reduced my student loan payment by $152 per month, by refinancing thru Comet"

Save Money Now