If you have trouble making college loan payments, you may need to apply for a loan forbearance or deferment. Both programs allow a temporary delay of payments on the principal and are granted for specified periods of time. The main difference is that interest does not accrue, or accumulate, on a subsidized loan in deferment; it does accrue on a subsidized loan and one in forbearance.
A deferment is automatically granted in situations involving school reenrollment, military duty or unemployment. Forbearance is offered at the lender’s discretion, usually when the borrower is not eligible for deferment.
Getting a Forbearance
In order to obtain a forbearance you must submit an application. If you have a Perkins Loan, call your college. A Direct Loan recipient should visit the Direct Loan Servicing Center website. If you have a Federal Family Education Loan or a private loan, contact the lending agency.
A lender granting a verbal forbearance agreement will need to get it in writing as well. For instance, people with a Direct Loan are directed to the Federal Student Aid (FSA) website for the General Forbearance Request form. Once downloaded, applicants explain why loan forbearance is being requested and specify whether a temporary halt on payments or a smaller payment is desired. Then applicants just sign and send the form; it’s that easy.
Can you prove that you need it the forbearance? Most lenders require supporting documentation. In cases of financial hardship, applicants must provide statements that prove monthly loan payments exceed income by at least 20 percent. Some student loan lenders evaluate eligibility on an annual basis.
Keep meticulous records. If you claim a temporary disability, retain copies of medical files. Likewise, it is a good idea to pay monthly interest on the student loan. Otherwise the interest is capitalized or applied to the principal. This increases the amount that you owe on the loan and results in higher payments after the forbearance period.
If you are considering a forbearance, chances are good that making loan payments is a struggle. Speak with your lender about your options. It is possible to consolidate loans and work out a repayment plan. Depending on your employment, you may even qualify for student loan forgiveness.
If you are having trouble coming to a resolution with a lender, contact the FSA Ombudsman for intervention help. If granted forbearance, remember to make the monthly interest payments to avoid capitalization and you will be in much better shape.