Graduating from school with a degree and a hefty student loan payment is a common occurrence nowadays. Loans are a viable option for financing your education, but repaying them can present a hardship, especially if you have rent, car expenses, utilities and other bills to pay. If making your student loan payments presents a hardship, requesting forbearance is one way to keep your account out of default and your credit intact.
Definition of Forbearance
Forbearance, according to the U.S. Department of Education, temporarily postpones or reduces the amount of your monthly student loan payment. When you apply for forbearance, you must prove hardship, such as a loss of income or other financial difficulty, and suggest an amount that you can pay. You can apply for a forbearance that will last up to 12 months at a time, for a total of three years over the life of the loan.
Forbearance and Credit
Requesting forbearance on your student loan will not affect your credit as long as you continue to make the payments on time as you agreed. The fact that your loan is in forbearance is not reported to the credit bureaus. However, when your loan is in forbearance and you make lower payments, the interest continues to accrue on the loan, increasing the overall balance that you will pay. Your credit report will reflect the higher balance and the fact that it takes you longer to pay off your loan.
Making Forbearance Payments
If you apply for forbearance on your student loan, wait until you receive confirmation that your request has been accepted before reducing your payments. Paying a reduced amount before being authorized to could cause your account to go past due, and that will show up on your credit report. If your student loan payments are made via automatic withdrawal from your bank, make sure you have enough cash in your account to cover the full payment until the forbearance is granted.
Other Payment Plans
Forbearance is only one way to keep your student loan account current and in good standing when you face financial struggles. If you meet certain economic hardship qualifications, are unemployed, are serving in the military or have re-enrolled in school, you can apply for a temporary deferment of your payments. If your loans are deferred, you do not have to make any payments for a specified amount of time. If your loan is unsubsidized, it will continue to accrue interest during the deferment period, and you'll end up paying back more when you do begin repaying the loan. If you do not qualify for a deferment, you may be able to switch payment plans, and pay less per month.
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