© Copyright 2006 Mitchell & Mitchell,
LLC, all rights reserved.
STUDENT LOAN FORBEARANCE
According to my dictionary, to forbear is to refrain from taking an action one is entitled to take. Student loan forbearance is the lender’s permission to take time off from making payments on your student loans, while the lender forbears from taking the collection actions to which they are entitled.
During a period of forbearance, the interest on your loans continues to accrue. It is capitalized, as often as quarterly, and always at the end of the forbearance. After capitalization, the lender charges interest on the interest. This is how your loan grows.
Forbearance is for no more than one year at a time. Some lenders will only issue forbearance in six month or one year increments, while others will agree to as little as two months to clear a delinquency.
It is fairly common practice for young people to place their student loans into forbearance in order to qualify for a larger home mortgage than they would otherwise be able to obtain. Some Mortgage loan programs allow borrowers to qualify without counting the Student Loan payment in the Income to Debt qualifying ratio, while other loan program require the lender to imput the payment and count it in the qualifying ratio, even though the payment is in forbearance.
There are several different types of forbearance on student loans, including mandatory forbearance (mandatory on the part of the lender), administrative forbearance (taken by the lender to clear up an involuntary delinquency), economic hardship forbearance (available on loans issued prior to 1993), and voluntary forbearance. Voluntary forbearance is the most commonly used and abused. Further details about the various types are included in my book, “Surviving Your Student Loans”.
Student Loan Forbearance:
Student Loan Topics:
Master Promissory
Note, Student Loan Deferment, Student Loan Forbearance, Student Loan Consolidation, Student Loan Discharge, Student
Loan Grace Period, Subsidized Student Loans, Unsubsidized
Student Loans, Stafford Student Loans, Perkins Student Loans, Direct Student Loans, PLUS Student Loans, William G. Ford
Student Loans, Student Loan Delinquency, Student Loan
Default, Student Loan Payment Options, Student Loan Case
Studies, Student Loan Management, Additional Reading Relating
To Student Loans, How Do I Get A Student Loan, How Do I Confirm
the Status of my Student Loans, Why Do I Owe Twice As Much As I Borrowed
On My Student Loans, Pending Changes Affecting Student Loans, Bankruptcy and Student Loans, Student Loans And Your Credit
Report, Student Loans, Gifts.
