When it comes to deferment and forbearance, however, there are two important things to consider:
- In most cases, interest will accrue during your period of deferment or forbearance. This means your balance will increase and you’ll pay more over the life of your loan.
- If you’re pursuing loan forgiveness, any period of deferment or forbearance likely will not count toward your forgiveness requirements. This means you’ll stop making progress toward forgiveness until you resume repayment.
Consider Another Repayment Plan First
Because of the impact on interest and potential loan forgiveness, it might be worth exploring another repayment plan before you consider deferment or forbearance. For example, your payments could be more affordable if you change to an income-driven repayment plan.
Contact your loan servicer to find out if another repayment plan might be the best option for you.
Discuss obtaining a deferment or forbearance with your loan servicer. Our goal is to keep you on the path to successful repayment of your federal student loan. We want you to avoid delinquency and default.
Explore Student Loan Deferment and Forbearance
If you’re eligible for a deferment or forbearance, you can temporarily suspend your payments.
If you choose to use a deferment or forbearance, consider paying the interest that accrues during that period, so that you can avoid some of the consequences.
Here is an example of the impact of forbearance:
If you have a loan balance of $30,000 and an interest rate of 6% and you are in forbearance for a year right after you enter repayment, $1,800 in interest will accrue on your loans. If you do not pay that interest, it will capitalize (be added to your principal balance).
Because interest accrues on your principal balance, capitalization will cause more interest to accrue over time than if you had paid the interest. It will also increase your monthly payment under most repayment plans. In this example, if you were on the Standard Repayment Plan, interest capitalization would increase your monthly payment by $20 per month and increase the total amount that you would pay by about $600.
Get Relief With Lower Payments on an Income-Driven Repayment Plan
Because of the impact of deferment and forbearance on interest and loan forgiveness, it might be better to consider a different repayment plan such as an income-driven repayment plan. These plans base your monthly student loan payments on your income and family size. In some cases, your payment could be as low as $0 per month. You can also qualify for loan forgiveness on your remaining balance if your loan is not paid in full after 20 or 25 years. Be aware, however, that you may have to pay taxes on the amount forgiven, and if you were making payments of $0 per month, that could be a significant amount of money.
Be sure to talk to your loan servicer about the best way to stay on track toward successful repayment of your federal student loan.