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The Cost of Forbearing Your Student Loan

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What is a forbearance?

A forbearance is a tool that lenders can use when you (the borrower) experience difficulty in making loan payments. If approved, a forbearance can

  • allow you to temporarily postpone student loan payments,
  • extend the time period for making payments, and
  • allow you to make reduced loan payments.

There are four types of forbearance:

  • Discretionary
  • Mandatory
  • Administrative
  • Mandatory Administrative

Although there are four types of forbearance, you will most likely be granted a discretionary forbearance or a mandatory forbearance. Both discretionary and mandatory forbearance types are options that you may request from the lender. In contrast, the other two types of forbearances (administrative and mandatory administrative) are applied automatically by the lender when specific situations occur.

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When may a lender grant a discretionary forbearance?

Discretionary forbearance may be granted in instances where you are experiencing financial hardship that keeps you from repaying your debt. For example, a discretionary forbearance may be granted if you are experiencing financial hardship due to

  • less than half-time school enrollment (half-time or more would qualify for deferment),
  • poor health,
  • unemployment (beyond the maximum deferment time limit),
  • a reduction in work hours, or
  • a life-changing circumstance.

Also, a discretionary forbearance in the form of reduced payments may be granted if you are experiencing financial difficulty. This allows you to continue the pattern of submitting payments on the account. Remember, it is always better to make smaller payments than no payments at all.

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When may a lender grant a mandatory forbearance?

Unlike discretionary forbearance, lenders must grant you a mandatory forbearance under certain circumstances. There are specific situations under which you may request a mandatory forbearance. A description of these situations follows:

  • Your participation in an Internship/ Residency program (beyond the timeframe requirements for a deferment)
  • Your participation in a national service position where you will receive an award under the National and Community Service Trust Act of 1993 (Americorp)
  • When you maintain eligibility for loan forgiveness under the Teacher Loan Forgiveness Program and your lender believes that the cancellation amount will satisfy the anticipated loan balance at the time of the expected cancellation
  • Service that qualifies under the Child Care Provider Loan Forgiveness Program
  • Service that qualifies for partial loan repayment under the Student Loan Repayment Programs administered by the U.S. Department of Defense

Note: You must provide documentation to support your eligibility.

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