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If you are temporarily unable to meet your repayment schedule and are not eligible for a deferment, you may be eligible to receive forbearance. Unlike most deferments, interest continues to accrue during any period of forbearance. You may also be required to make monthly interest payments. Forbearance is different from deferment in that it helps students experiencing financial hardship to lower their monthly payment amount during repayment. Lenders may grant forbearance for various reasons: financial hardship, poor health, national military mobilization, national emergency, or service in AmeriCorps. You must continue making scheduled payments until you are notified that the forbearance has been granted. Failure to do so may result in a past due status and a negative credit rating.
Forbearance is not tied to enrollment status. If you have borrowed federal student loans, you are eligible for up to three years of forbearance. It is unlikely that a lender will give you three years of forbearance all at once. You will most likely receive six to nine months of forbearance and then have to re-apply if more time is needed. In order to obtain forbearance, you must submit the appropriate paperwork to each lender from whom you are requesting forbearance. The lender will review your application and negotiate a lower monthly payment with you. Sometimes the lender will give you a zero monthly payment amount based on your income and debt; however, many lenders will require you to make interest-only payments to minimize the amount of interest you will pay overall, since interest accrues during forbearance.
Keep in mind that during forbearance any unpaid interest is capitalized and added onto the principal balance when the loan comes out of forbearance. If you choose to consolidate your loans and at some point need to request forbearance, you may lose any repayment incentive benefits that a specific lender offered. Check with the lender before applying for forbearance, then weigh the pros and cons according to your personal finances. There are also certain types of forbearance and you will want to check with your lender regarding the type of forbearance that is best for you given your specific situation at the time of your request. See if you qualify for an Economic Hardship Deferment before you request forbearance. This type of forbearance will give you the added benefit of minimizing the amount of interest you accrue during forbearance since Economic Hardship Deferment will allow your subsidized loans to remain subsidized.
Students and alumni who use forbearance will need to be aware that LIPP will not cover any interest that has accrued during a period of forbearance.
Private lenders are not required to offer you any forbearance options but many lenders will work with a borrower in order to assist them in making on-time payments. Additionally, you may lose your borrower benefits if you put your loans into forbearance since many of them require the first 12 payments to be made on time. A private loan lender or servicer may charge a fee for the use of forbearance. For more information on forbearance contact your lender and review the federal guidelines at StudentLoans.gov
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