Forbearance on your student loans occurs when you lower or stop your loan payments for a certain period of time. It is different from deferment of your student loan because your interest keeps accruing during forbearance, whereas with deferment your interest stops accruing. While it might seem like an easy solution if you’re having trouble paying back your loans, you should look into the pros and cons before making your final decision.
Pros of Forbearance
If you’ve had a sudden, temporary setback, forbearance can be a way to help you get back on your feet financially. Even if you are just having trouble finding work or saving money, forbearance can give you a little more time to get settled and figure your finances out. If you are considering defaulting on a student loan, look into forbearance first. Defaulting can affect your credit score, whereas forbearance could prevent that from happening. However, forbearance shouldn’t be a long-term plan; consider forbearance first if you only need a bit more time to get your finances and payments together.
Cons of Forbearance
The major con is that you still accrue interest while in forbearance. This means that your total amount owed will increase. Depending on your loan provider, you may even have to pay an up-front fee to apply for forbearance. This, coupled with continuing to accrue interest, means that you’ll owe more overall. Lastly, consider how much time you will need to get settled and ready to start making the monthly payments. Most loan lenders allow forbearance for up to a year, so you’ll want to plan accordingly and create a budget that you have to stick to.
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