How to Avoid Forbearance on Student Loans

You just got hired out of business school. Suddenly, you get a bill saying you owe money on your student loans. You decide to postpone your payment until down the road.

Yet, experts say postponing payment on student loans can lead to higher payments later on.

Farran Powell, reporter for US News, recently discussed how students can avoid putting student loans in forbearance.

“I went the forbearance route, and it added thousands of dollars to my loan balance,” Cornelius Davis Jr. of Atlanta, who earned both his bachelor’s and graduate degree from Jackson State University in Mississippi, tells US News. “Not being in position to start repayment, l decided to put it in forbearance [after earning a graduate degree] and ended up leaving it there for close to seven years.”

Experts say graduates often decide to postpone payment because it seems like the simpler option.

“[Student loan] servicers sometimes push forbearances because they are easy,” Mark Kantrowitz, a college financial aid expert and adviser to Savingforcollege.com, tells US News.”It takes just a few minutes to explain, and the form can be completed by telephone. Compare that with the forms for income-driven repayment, which are 10 pages long and can’t be completed by telephone.”

So how do you avoid forbearance?

Enroll in an Income-Driven Repayment Plan

If you have difficulty repaying your student loans, experts say it may be wise to consider an income-driven repayment plan.

There are a number of income-driven repayment plans available to borrowers. Here’s a breakdown from the US Department of Education.

(Source: Homeroom, the official blog of the US Department of Education)

How do they work?

“Monthly payments under an IDR plan are determined by income and household size,” Powell writes. “In some cases, payments can be as low as $0; a few of these plans forgive the loan balance after 20 or 25 years of repayments.”

Request a Reduced Monthly Payment

Depending on your lender, some may allow lowering of monthly payments due to circumstances.

“If you need a forbearance, consider asking the lender for a reduced monthly payment instead of a complete cessation of monthly loan payments. This will keep the loan from getting large,” Kantrowitz tells US News.

Sources: US News, US Department of Education