During hard economic times, many people are looking to reduce their monthly debt from utility bills, credit cards and other living expenses. Student loans can be a major expense that can be temporarily relieved with forbearance of payments. Student loan forbearance allows you to suspend your federal or private loan payments due to certain pre-determined circumstances. These can include unemployment, partial disability or other documented economic hardships.

Federal Student Loan Forbearance
During federal student loan forbearance, interest still accrues on your Perkins, Stafford, PLUS or Grad PLUS account(s). You can opt to make interest-only payments during this time if you choose, but it is not required. Either way, you are usually granted forbearance in periods of one year at a time, with no time limit to the forbearance due to extreme economic hardship. You can apply for forbearance through your lender and payments must be made until it has been approved in writing.

Keep in mind also that your interest rate may not be locked in during a forbearance period. If you borrowed money through a Stafford Loan prior to July 1, 2006, you will still have a variable interest rate unless you consolidate under a fixed rate with your lender. Loans made after July 1, 2006 have fixed rates.

Smart Strategies
Before you apply for forbearance of federal student loans, you may consider applying for deferment instead if you have federally subsidized loans. During a deferment period, the government pays the interest accrued, but not during a forbearance period. Deferment is granted one year at a time, for up to three years. After this period, though, you can no longer defer and you must opt for forbearance if you still can’t make your payments.

Also in lieu of forbearance, you can try to find creative ways to get someone else to pay for your loan, such as with work programs and government incentives. The federal government has a number of alternative options that can help you pay off student loan debt.

Private Student Loan Forbearance
Forbearance for private student loans is subject to individual lender rules. This agreement is usually shorter than federal forbearance, averaging a year at most. Economic hardship is the most common reason for private loan forbearance, but medical school or residency and other continuing education programs can also help you obtain a short-term forbearance of loan payments.

Smart Strategies
Some private student loans also offer deferment for up to three years, depending on the lender. Always opt for deferment first to avoid having to pay interest accrual during the suspension of payments (when applicable).

Even if you can’t afford your entire monthly payment, you can make small payments ($20 or $50, for example) on your loan account during deferment or forbearance to keep your balance in check. Be sure to verify with your lender that these payments do not affect your forbearance eligibility.

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