If the unexpected happens and you need to stop making your student loan payments, the best thing to do is not ignore the situation. So, how do you handle it? You contact your lender, explain your situation and ask what options may be available. One option they may offer you is a forbearance.
A forbearance is a period during which your monthly loan payments are suspended or reduced. If you are unable to make payments due to financial hardships, this option could help you to avoid having a past due balance and risk damaging your credit.
During a forbearance period, interest may continue to accrue on your loan. This interest is added to your principal balance. This could impact the amount you have to repay over the life of your loan. If you’re able to make smaller payments to at least cover the interest, you may reduce that impact. Bank of North Dakota’s Interest Accrual Calculator estimates the amount of interest that may accrue while payments are postponed.
Have federal student loans?
In addition to multiple types of forbearances including general and mandatory, you may be eligible for an income-driven repayment plan or deferment. These options are all unique in how they may impact your loan.
Don’t confuse a forbearance with a deferment!
Yes, there is a difference. If you have an eligible type of federal student loan and you qualify for a deferment, you may not be responsible for paying the interest that accrues during that period. You must also meet certain criteria for deferments. Forbearances are granted at the lender’s discretion.
Regardless of what’s causing your hardship, the most important thing is to not ignore the situation. Also remember to continue making payments until you know if your lender granted you a forbearance. Because you won’t make as much progress in repaying your loan while on forbearance, you may want to consider stopping your forbearance early if you can start making regular payments sooner.