Student Loan Forbearance Explained

If you have taken out a student loan, but you are struggling to make your payments, then you have probably heard of loan forbearance. What is student loan forbearance? Here, in this article, we will discuss the meaning behind student loan forbearance and whether you should get one or not.

Let’s take a better look at what forbearance is and how it can help you. It’s most commonly used by people who are struggling financially and can’t make their loan payments on time. Simply put, forbearance is a temporary suspension of your loan payments. You are eligible for this if you can prove that you are going through financial hardships and that you are unable to make your payments on time.

So, once you are able to do so, your payments will be put on halt for a set period of time.

What Exactly Is Student Loan Forbearance?

Now that you have a better understanding of forbearance let’s see what the forbearance student loan definition is. Student Loan Forbearance is a program that is offered by the government, and it allows qualified borrowers to temporarily stop making payments on their student loans.

With that said, remember that there is a criterium required for you to be eligible for it. This can be a very helpful option if you need time off to deal with a medical emergency or you are having money problems at the moment, but at the end of the day, make sure that you understand the risks involved before taking this step.

Forbearance vs. Deferment: What’s the Difference?

A lot of people are looking to find a way to pause payments on their student loans. So, by now, you are wondering what is better; student loan deferment vs. forbearance. Here we will give you a better explanation of their differences.

Let’s start with the biggest difference between them, which is that forbearance allows you to stop making payments on your student loans for a certain period of time, while deferment keeps them current.

Simply put, with deferment, you will still have to make payments, but they will be smaller during that time, and you will not have to pay interest on the loan. On the other hand, if you go for a forbearance, you will still have to pay interest on the loan, but your payments will be paused for a set period of time.

Either way, both options can be good, but make sure you do your research and understand how they will affect your finances later.

The Benefits and Drawbacks of Student Loan Forbearance

If you are considering student loan forbearance forgiveness, it’s crucial to understand that it comes with both good sides and bad sides. This can be a great option for you, and it can help you avoid defaulting on your loan, but know that there are some risks involved.

Here are some benefits:

• Doesn’t impact your credit score
• Has lower interest rates
• Can free you if you have a financial hardship

Now let’s take a look at the downsides:

• Not a long-term solution
• If you take it multiple times, it can result in loan default
• Has huge fees

Benefits

Forbearance can help you temporarily to put your student loan payments on pause. This way, you can avoid defaulting on your loan, which can have a bad impact on your credit score in the future. Also, it can help you to save some money on the way, since when it’s in forbearance, you will not either pay less or nothing.

Drawbacks

On the other hand, it can also have very big downsides. If you are delaying your payments during forbearance time, your lender can charge you enormous fees and also add an extra month of interest rate to the total amount of your loan. Also, if you don’t make payments during that time, the lender can increase your loan’s principal balance or issue a foreclosure notice.

Is Student Loan Forbearance a Good Idea?

When talking about student loan forbearance, this can be a great help if you are having trouble making your student loan payments. However, it’s crucial to weigh out the pros and cons carefully before deciding whether to take advantage of this option or not.

The first thing you should consider is whether you have any other options available to you. On the other hand, if you have a federal student loan, this can be a good thing for you since the administrative forbearance allows you to pause or suspend payments until September 1st, 2022, and interest rates are set to 0% during this time.

Even though we can’t tell you if this is something that can work for you or not, the information we have given you here and, of course, consultation with a financial advisor can help you a lot in making a decision best for you.

When Does Student Loan Forbearance Make Sense?

Sometimes student loan forbearance can be an ideal option for you. The first one being if you are within 120 days of defaulting on your student loans, a forbearance may be a viable option.

Also, if you have been employed over the period of 90 days and your student loans are not paid directly by your employer, forbearance can be a good option to avoid wage garnishment.

On top of that, if you already have student loan forbearance, you might want to consider an extension. This is because the Biden Harrison administration has extended the time period of forbearance. Now, with that said, you are probably wondering when does forbearance end?

Well, we got good news for you, the period has been extended until December 31st, 2022. To sum it up, in this economy, it makes perfect sense to take or extend the forbearance, save up some money while the loan is paused or suspended, and get back on track with the payments.

Bottom Line

Here we talked more about student loan forbearance, how it can benefit you, and whether it is a smart thing to do. Even though we can’t tell you for certainty that this is going to work wonders for you, it can help a lot, especially if you are struggling financially.

With that said, go check the need requirements for qualification, do your diligence and speak to a financial advisor and make the best plan for yourself and your finances.