How Student Loan Deferments and Forbearance Work

Logistics of Forbearance

If you need to postpone payment of a loan but do not qualify for deferment, then forbearance might meet your needs. The procedure for obtaining federal loan forbearance is much like that for deferment. Step one: You must apply. Again, just like a deferment, nothing is automatic, not even a continuation of forbearance. Keep making those payments until you've received notification from your lender that the status has been approved.

If you have a Direct Loan, access an application online from the U. S. Department of Education [source: Federal Student Aid: Forbearance]; for FFEL or Perkins Loans, you'll have to contact your lender. Many of these forms may be available on lenders' Web sites.

How long will forbearance last? Like deferment, that depends upon the reason, and, if you need an extension, you must re-apply:

  • Financial hardship (also called general forbearance): Lasts for one year; may reapply if needed.
  • Loan burden: Lasts for one year; may reapply if needed, but forbearance cannot exceed three years.
  • Internship/residency: Lasts for one year; may reapply if needed.
  • AmeriCorps: Application is for term of service, not to exceed three years.
  • Teacher Forgiveness Program: If you are a participant in this program, you can forbear your loan. You have a service commitment for five years, and you must apply for a forbearance each year.

[source: Federal Student Aid: Forbearance]

Unlike some deferments, you definitely will be responsible for interest that accrues during forbearance, and you might want to consider paying the interest instead of letting it accumulate. Any unpaid interest is added to the principal, increasing the total amount you will owe. In any case, your credit rating should not be negatively impacted, because it's just a postponement, not a default on payments [source: Federal Student Aid: Did You Know]. If you do stop paying your loan, however, your chance of acquiring forbearance plummets [source: Federal Student Aid: Default].

By now, you can probably anticipate the recommended procedure for obtaining forbearance on a private loan. All together now: It depends upon your lender.

The U. S. Department of Education provides information on alternatives to forbearance. For instance, there are other methods of reducing monthly payments, or you may adjust the date on which your payment is due. If it doesn't coincide with your other bills' due dates, repayment might be more manageable [source: Federal Student Aid: Did You Know].

You now have a tremendous amount of information: How do you determine what to do? To facilitate the decision-making process, let's look at the pros and cons of deferments and forbearance.