Forbearance

What is a forbearance?

A forbearance is a tool that your loan holder 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 loan holder. These are described in more detail below. In contrast, the loan holder will automatically grant the other two types of forbearances (administrative and mandatory administrative) when specific situations occur.

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When may a loan holder grant a discretionary forbearance?

A loan holder may grant a discretionary forbearance in instances where you are experiencing financial hardship that keeps you from repaying your debt. Instances in which a loan holder may grant you a discretionary forbearance include but are not limited to:

• Less-than-half-time school enrollment (half-time or greater enrollment would qualify you for a deferment),
• Poor health,
• Unemployment (beyond the maximum deferment time limit),
• A reduction in work hours, or
• A life-changing circumstance.

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

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When may a loan holder grant a mandatory forbearance?

Although a loan holder is not required to grant a discretionary forbearance, a loan holder must grant a mandatory forbearance under certain circumstances. These circumstances include:

• Your participation in an Internship/Residency program (beyond the maximum deferment time limit).
• Your participation in a national service position where you will receive an award under the National and Community Service Trust Act of 1993 (AmeriCorps).
• When you maintain eligibility for loan forgiveness under the Teacher Loan Forgiveness Program and your loan holder believes that the forgiveness amount will satisfy the anticipated loan balance at the time forgiveness will be granted.
• 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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