When you owe money on student loans, you’re expected to make monthly payments. There could come a time, however, when you cannot pay your bills because of financial hardship. If this happens to you, you may want to pause your payments by putting loans into forbearance.
Forbearance is an option with federal student loans, which are issued through the Department of Education. But, if you have private student loans, you may be wondering if this option is also available to you.
The good news is that most private student loan providers do allow you to put loans into forbearance. However, there are more limits on when you can do so and usually, you will only be able to pause payments for a short period of time.
What is private student loan forbearance?
Forbearance refers to a temporary suspension of your student loan payments. During the period of time when your loans are put into forbearance, you will not have to make monthly payments.
Be aware that you will continue to accrue interest during this time, so although your payments are on hold, the total amount you owe will continue to increase.
When are you eligible for private student loan forbearance?
Individual private student loan lenders can set their own guidelines for forbearance. However, many lenders have common policies in place. For example, you may be able to keep loans in forbearance while you are still attending school so you don’t need to make payments until you graduate.
You can also apply for forbearance after graduation if you are unable to make loan payments on a temporary basis. If you have lost your job and have no income, for example, you could contact your private lender to request to put your loans into forbearance.
Be aware that some private lenders may not allow forbearance at all -- although most will try to work with you if you lose your income temporarily.
How long can you put private student loans into forbearance?
Most private student loan lenders set a maximum time that loans can be in forbearance, depending on your situation.
Attending school: Your lender may allow you to keep loans in forbearance while you’re still attending school, but you may not be allowed to put off paying your loans by stretching out your schooling. For example, your lender may only allow you to pause payments on private loans for four years while you complete your degree -- so if you take five years to graduate, you may have to start paying on your loans.
Limited aggregate forbearance: After graduation, lenders typically limit the aggregate time that loans can be in forbearance -- often to a total of 12 months. This might mean if you pause payments on your loans for six months and then lose your job again two years later, you’d only be able to access another six months of forbearance.
Short time periods: You may also be required to reapply for forbearance after a short period of time, even if you haven’t reached your maximum forbearance time limit. For example, your lender may stipulate that you can only qualify for two or three months of forbearance at a time. If you were still out of work after three months, you could keep reapplying you hit your 12 month aggregate limit.
Does putting private loans into forbearance cost money?
Some lenders do charge a fee when you put private student loans into forbearance. This could make it expensive to pause your payments -- especially if you have to apply for forbearance every two or three months and pay a separate fee each time you do.
You will also incur higher interest costs over time if you put loans into forbearance.
How does interest work when loans are in forbearance?
When you put private student loans into forbearance, this pauses payments but it doesn’t pause the accrual of interest charges. You will continue to be charged interest, which will grow your loan balance, ultimately leaving you with a larger amount to pay back.
How does private student loan forbearance differ from federal student loan forbearance?
The main differences between private and federal student loan forbearance are the time periods open to you, and the conditions under which you can apply.
Private student loans usually have shorter forbearance periods than federal student loans.
And while federal student loans have standard policies regarding when you can put loans into forbearance and for how long; with private loans they can from one lender to another.
There are actually two kinds of forbearance for federal student loans: general and mandatory. Unlike private loans, if you qualify for mandatory forbearance, all federal student loan servicers must allow it. These are granted for up to 12 months at a time under a number of conditions, such as medical or dentistry residencies, Americorps positions, or people in the National Guard who have been activated but aren’t eligible for military deferment.
Federal student loans also give general forbearance for other reasons such as financial hardship, medical expenses or a change in employment. And what sets these apart from private loans is that while some federal loan servicers do set limits, there is generally no fixed time limit on general forbearance.
Private lenders have more discretion on when they can approve or deny a loan forbearance request, and many private lenders require you to apply more often than federal servicers do.
Is there an option for private student loan deferment?
The difference between loan forbearance and deferment is that you don’t accrue interest during the deferment. Federal student loans can be put into deferment under a number of circumstances and the government will subsidize the interest.
Private lenders, on the other hand, do not offer deferments. If you pause payments on private student loans, the government will not pay any portion of your interest -- even if you have a good reason to stop paying for a period of time.
Should you apply for private student loan forbearance?
Before you apply for private student loan forbearance, consider whether doing so is really necessary -- keeping in mind that your loans may become more costly and take longer to pay back if you pause your payments.
Remember that these loans often only allow a limited total forbearance time, so if you use up six months now, it will eat into the time that is available further down the road.
However, if you cannot afford your bills and need payments to stop temporarily, forbearance is generally your best and only option with private loans. Check your loan paperwork to see what circumstances entitle you to forbearance. If you believe you’re eligible, contact your lender as soon as possible.