What it is, how it works

Student loan forbearance can be a helpful option if you’re facing temporary financial difficulties. Student loan borrowers in the class of 2020 had an average of over $30,000 in debt in 19 states, according to The Institute for College Access & Success. It can alleviate some of the burden by placing your loan payments on pause, but it comes with a trade-off. You’ll accrue more interest on your loan and you’ll extend the overall time it takes to repay your debt. Here’s what you need to know about student loan forbearance and when it might be an option worth considering. 

Note:

If you have federal subsidized loans, consider deferment instead of forbearance. Interest accrues on all loans during a forbearance, but it doesn't accrue on subsidized loans in deferment.

Student loan forbearance allows you to temporarily stop or reduce your federal student loan payments for up to 12 months at a time if you're facing financial hardship or other qualifying circumstances. If your financial situation doesn't improve, you might be eligible to extend this period. However, the total forbearance time for federal loans is capped at three years.

During forbearance, interest on your loans continues to accrue daily, which can extend your repayment period and increase the total amount of interest you owe. That’s why forbearance should generally be considered as a last resort.

Forbearance options may also be available for private student loans, but the terms can vary significantly between lenders and are often less favorable than those for federal loans.

During forbearance, interest continues to accrue on all federal student loans. But unlike deferment, this interest generally won’t capitalize, meaning it won’t get added to your principal loan balance when the forbearance ends. Instead, you’ll be required to pay off the accumulated interest through your normally scheduled monthly payments. 

Tip:

To prevent interest from accruing during a forbearance, you do have the option to make interest-only payments.

Private loan forbearance may work differently and rules vary by lender. Typically, interest will continue to accrue and it may or may not capitalize when repayment starts. Contact your lender to ask about their hardship relief policies and what repayment looks like after a forbearance. 

Let’s say you have $30,000 in federal student loans with a 6.00% interest rate, and you’re on the 10-year Standard Repayment Plan. If you place your loans in forbearance for one year, a total of $1,800 in interest will accrue during this time. Once the forbearance period ends, you’ll be responsible for paying the accrued interest through your normal monthly payments, and your monthly bill will increase by $18. 

There are several different types of student loan forbearances. Some are mandatory and others are up to the discretion of your loan servicer.

Student loan borrowers having trouble keeping up with their payments on Direct Loans, Federal Family Education Loans (FFEL), or Perkins Loans can apply for a general forbearance. General forbearance lasts up to 12 months and can be extended for a cumulative maximum of three years. You may qualify if you’re facing financial difficulties, have costly medical expenses, or are unemployed. Your loan servicer may accept other reasons, but this varies by servicer.

Your federal Direct Loans and FFEL student loans may qualify for mandatory forbearance if you’re serving in the AmeriCorps and received a national service award; serving in a medical or dental internship or residency program; activated in the National Guard; teaching on the path to Teacher Loan Forgiveness; eligible for partial repayment of your loans under the Department of Defense Student Loan Repayment program; or when the total you owe each month for all federal student loans is 20% or more of your total gross monthly income. If you meet the requirements for a mandatory forbearance, your loan servicer must grant it. Mandatory forbearances can last up to 12 months at a time if approved.

The Department of Education had an administrative forbearance plan in place during the pandemic to help federal student loan borrowers during trying financial times. During this forbearance, interest rates were set at 0%, and borrowers with eligible loans had their payments paused. The 0% interest rate officially ended on Sept. 1, 2023, and payments resumed in October 2023. 

Private lenders may not be as flexible when it comes to pausing payments, including while you’re in school. However, some offer assistance when you’re experiencing unemployment or other financial difficulties. Contact your lender to explore your forbearance or deferment options.

Pros and cons

Pros of forbearance

• You can pause your student loan payments.
• You can free up money in your monthly budget.
• You may be able to avoid delinquency or default.

Cons of forbearance

• It’s only available for up to 12 months at a time.
• Interest continues to accrue on all student loans.
• You’ll have higher monthly payments when the forbearance ends.

You may want to consider applying for a general forbearance if: 

• You can’t afford your monthly student loan payments or you’re at risk of default.
• Your financial challenges are only temporary, and you expect to recover in the next 1 to 3 years.
• You have federal student loans that are not subsidized loans.
• You can’t qualify for deferment.

You must apply for and wait for approval for student loan forbearance in most cases. If you don't make your student loan payments before receiving approval, it could hurt your credit score and put you into default, so don't wait until the last minute if you need to apply for it.

If you have federal Direct Subsidized Loans or Perkins Loans, consider student loan deferment. 

Deferment, like forbearance, pauses your student loan payments. The main difference between them is that interest continues to accrue during forbearance for all loans, but it doesn’t accrue for subsidized loans while they’re in deferment. You can become eligible for deferment under a variety of circumstances, such as economic hardship, returning to school, enrolling in the military, or undergoing medical treatments. 

If you don’t expect your financial situation to improve in the foreseeable future, switching to an income-driven repayment (IDR) plan might be a better option than forbearance in the long run. IDR plans such as SAVE, PAYE, IBR, and ICR set your monthly payments at a percentage of your income and forgive your remaining debt after your designated repayment period ends. This can help make your monthly payments much more manageable. 

Refinancing your student loan debt at a lower interest rate can also be a strategic way to make your monthly payments more affordable. Most private student loan lenders will only offer loans to borrowers with credit scores in the mid-to-high 600s and with proof of income, so you likely won’t qualify on your own if your credit has been damaged due to late payments. You may be able to apply with a cosigner and get approved, but you should carefully consider whether you can make payments, as your cosigner would be held responsible for repaying the debt if you can't. 

Before refinancing federal loans, ensure you don’t plan on taking advantage of any forgiveness programs or income-driven repayment plans offered by the government. Refinancing federal student loans into a private loan means losing access to these and other federal benefits.

Fox Money rating

Fixed (APR)

4.94% - 8.69%

Loan Amounts

$10,000 up to total refinance amount

Min. Credit Score

Overview

Borrowers who graduated with at least a bachelor’s degree may refinance their student loans with ELFI. Every applicant is assigned a student loan advisor to help guide them through the process.

Students who wish to take over their parents’ PLUS loan may do so by refinancing with ELFI — something not offered by every lender — but spouses can’t consolidate their loans into a single refinancing loan.

Unfortunately, ELFI doesn’t allow borrowers to release cosigners, nor does it offer any rate discounts. However, borrowers who experience financial hardship may be eligible for up to 12 months of forbearance.

Interest rates

Fixed and variable

Minimum credit score

Minimum income

Loan terms

5, 7, 10, 15, or 20 years for student loan refinancing; 5, 7, or 10 years for parent loan refinancing

Loan amounts

Minimum of $10,000 with no set maximum. 

Cosigner release

Eligibility

Must be a U.S. citizen or permanent resident with a bachelor’s degree or higher. Must have at least $10,000 in student loans to refinance and a minimum credit history of 36 months.

Fox Money rating

Fixed (APR)

5.24% - 9.40%

Loan Amounts

$5,000 - $250,000

Min. Credit Score

Overview

Founded in 2009, LendKey partners with 300+ community banks and credit unions to connect borrowers with the loans they need. You can compare multiple lenders at once without affecting your credit score.

However, the exact terms and qualification requirements available through LendKey vary depending on your chosen community lender. While you can easily compare options, you’ll need to read the fine print of each offer to make sure the loan offers everything you need. 

Interest rates

Fixed or variable

Minimum credit score

Minimum income

Does not disclose

Loan terms

5, 7, 10, or 15 years

Loan amounts

$5,000 to $250,000

Cosigner release

Varies based on lender's terms

Eligibility

Must be a U.S. citizen or permanent resident and have already graduated with at least an associate degree from one of LendKey lenders’ eligible institutions.

Fox Money rating

Fixed (APR)

6.00% - 10.37%

Loan Amounts

$7,500 - $200,000

Min. Credit Score

Overview

EdvestinU is a loan program offered by Granite Edvance Corporation and offers affordable rates for refinance loans. Borrowers can refinance federal and private loans, and fixed and variable rate loans are available.

EdvestinU refinance loans are available to residents of about 20 states, and the lender has higher loan minimums and lower maximums than some competitors. Both of these factors limit who can (or might want to) refinance with this lender, but eligible borrowers do have various repayment term options.

Interest rates

Fixed or variable

Minimum credit score

Minimum income

Does not disclose

Loan terms

5, 10, 15, or 20 years

Loan amounts

 $7,500 to $200,000

Cosigner release

Eligibility

U.S. citizens or permanent residents who are at least 18 years old and reside in Alaska, Arkansas, Colorado, Connecticut, Florida, Maine, Massachusetts, Nebraska, New Hampshire, New Jersey, New York, North Carolina, Puerto Rico, Rhode Island, Texas, Utah, Virginia, Washington, West Virginia, and Wisconsin.

Fox Money rating

Fixed (APR)

6.15% - 10.14%

Loan Amounts

$5,000 - $250,000

Min. Credit Score

Overview

INvestEd is an Indiana-based nonprofit lender that provides refinanced student loans nationwide. As a nonprofit, INvestEd offers competitive rates as well as an autopay discount. Cosigner release is also available after 12 on-time payments, which is less than many competitors.

However, the maximum refinance limit of $250,000 is below what other lenders may allow. Borrowers must also comply with strict credit and income requirements to qualify, or must have an eligible cosigner. While credit requirements are clearly defined, there’s no way to prequalify with a soft credit check.

Interest rates

Fixed or variable

Minimum credit score

Minimum income

Does not disclose

Loan terms

5, 10, 15, or 20 years

Loan amounts

$5,000 to $250,000

Cosigner release

Eligibility

U.S. citizens or permanent residents are eligible. Borrowers must meet minimum requirements including a FICO score of 670 or higher, annual income of $36,000, a debt-to-income ratio below 40% to 50%, a year of continuous employment, and no defaults or serious collection activities in recent years.

Fox Money rating

Fixed (APR)

6.20% - 8.99%

Loan Amounts

$10,000 up to the total amount

Min. Credit Score

Overview

Massachusetts Educational Financing Authority (MEFA) offers refinancing loans to student borrowers — and unlike many other lenders, you don’t need to have earned your degree to qualify. Only fixed-rate loans are available, but the rates are competitive and may be lower than what other lenders can offer. MEFA also doesn’t charge any fees or penalties.

Refinance loans start at $10,000, and you must have made six consecutive on-time payments on the original loans over the most recent six months. If you can’t qualify based on your own credit history, you can add a cosigner.

Interest rates

Minimum credit score

Minimum income

Does not disclose

Loan terms

7, 10, or 15 years

Loan amounts

$10,000 up to your total debt

Cosigner release

Eligibility

Must be a U.S. citizen or permanent resident who is the primary borrower on education debt used to attend an eligible college or university. Must have made six on-time loan payments over the most recent six months. Must have no history of default or delinquency on education debt for the past 12 months and no history of bankruptcy or foreclosure in the past five years.

Fox Money rating

Fixed (APR)

6.34% - 8.54%

Loan Amounts

$7,500 - $250,000

Min. Credit Score

Overview

Founded in 1981, Rhode Island Student Loan Authority (RISLA) is a nonprofit lender that offers refinance loans to borrowers in all 50 states. Though most private lenders require borrowers to have graduated to qualify for refinancing, RISLA also serves borrowers who didn’t complete their degree.

RISLA offers income-based repayment to borrowers in financial distress. Additionally, borrowers may also access up to 24 months of forbearance in the event of financial hardship. Borrowers who return to graduate school may defer repayment on their refinancing loans for up to 36 months.

Interest rates

Minimum credit score

Minimum income

Loan terms

5, 10, or 15 years

Loan amounts

$7,500 minimum up to of $250,000, depending on degree

Cosigner release

Eligibility

Borrower or cosigner must meet credit requirements. Student must be a U.S. citizen or permanent resident and have used original student loans to attend an eligible degree-granting institution.

Fox Money rating

Fixed (APR)

6.50% - 10.99%

Loan Amounts

$10,000 - $750,000

Min. Credit Score

Does not disclose

Overview

Citizens offers student loan refinancing to qualifying borrowers who refinance at least $10,000 in student loan debt. 

Undergraduate borrowers can refinance up to $300,000 in student loans, while those who borrowed for graduate or professional degrees have higher limits of $500,000 or $750,000. Citizens offers fixed and variable rates and repayment terms between five and 20 years.

If you’re a medical resident, you can refinance your student loans and only pay $100 per month for up to four years while completing your residency or fellowship. 

Interest rates

Fixed or variable 

Minimum credit score

Minimum income

Does not disclose

Loan terms

5, 7, 10, 15, or 20 years 

Loan amounts

$10,000 minimum, with a maximum of $300,000 for bachelor’s degree or below; $500,000 for graduate degrees; and $750,000 for professional degrees

Cosigner release

Eligibility

Must refinance at least $10,000 in student loans and be a U.S. citizen, permanent resident, or resident alien with a valid U.S. Social Security number. Must have earned at least a bachelor's degree to qualify.

Fox Business does not make or arrange loans.

Janet Berry-Johnson

Janet Berry-Johnson is an authority on income taxes and small business accounting. She was a CPA for over 12 years and has been a personal finance writer for more than five years. Janet has written for several well-known media outlets, including The New York Times, Forbes, Business Insider and Credit Karma. In 2021, Canopy named her one of the Top 10 Influential Women in Accounting and Tax.

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