Key points
- Forbearance allows you to pause student loan payments but interest continues to accrue during that period.
- It should only be used in cases of short-term hardship, as repeated or extended forbearance can increase your loan balance.
- Beginning July 1, 2027, new federal borrowers will face stricter limits, with the forbearance period capped at 9 months in any 24-month period.
Struggling to keep up with your student loan payments? You’re not alone: Millions of borrowers are turning to the student loan deferment program for short-term relief when facing financial or personal challenges.
Student loan forbearance allows you to pause or reduce your student loan payments for a limited period of time. They can serve as a safety net if you’re in a temporary pinch, but they come with long-term costs that many borrowers underestimate. For many borrowers, this may not be the best option — getting an income-driven repayment plan may be smarter.
Here’s everything you need to know about how forbearance works today, when it makes sense, and how changes coming in 2027 will make it even more restrictive for new borrowers.
Would you like to save this?
We’ll email you this article, so you can come back to it later!
What is student loan forgiveness?
Student loan forgiveness is a temporary stop or reduction in your monthly loan payments, and is typically granted when you experience short-term financial hardship, job loss, or medical challenges. Sometimes a government is required to forgive – such as the current tolerance of SAVE.
While forbearance stops required payments, interest continues to accrue. Once the forbearance period ends, that interest is often capitalized (added to your loan balance) meaning you’ll eventually pay interest on that interest later.
For this reason, forbearance is best viewed as a short-term relief tool, rather than a long-term repayment strategy.
Federal forbearance versus private student loans
Federal student loans offer more standardized and transparent forbearance options than private lenders.
|
Loan advantage |
Federal loan |
Private loan |
|---|---|---|
|
Availability |
Yes, multiple options |
Depends on lender policies |
|
period |
Currently up to 3 years, new caps in 2027 and beyond |
Varies, often 3-12 months |
|
interest |
It always accumulates |
It always accumulates |
Private lenders are not required to offer forbearance, but some may allow temporary payment pauses or interest-only periods. Always check the terms and their impact on interest before agreeing.
Forbearance versus postponement
When it comes to federal student loans, both forbearance and deferment temporarily stop payments — but the interest rules differ.
|
head
|
patience |
Postponement |
|---|---|---|
|
Interest on subsidized loans |
Interest accumulates |
Government concessions |
|
Interest on unsubsidized loans |
Interest accumulates |
Interest accumulates |
|
Typical use cases |
Financial difficulties |
In school, military service |
For private loans, “deferment” and “forbearance” often mean the same thing – always confirming whether interest will continue to accrue.
Types of federal student loan forgiveness
There are two types of forbearance with federal student loans: general and mandatory.
-
general. Also known as discretionary forbearance, general forbearance is available to you if you cannot make your payments due to medical expenses, financial hardship, job change, or other reasons that may be accepted by the Office of Federal Student Aid. You must apply for this type of forbearance, and your provider has the authority to deny your application at its discretion.
-
mandatory. This type of forbearance is used in many situations, such as when you are in medical training or a residency program, when you are a member of the National Guard who has been activated, or when your payment is more than 20% of your gross monthly income (for the full list, see Financial Supervision Authority website). If you qualify for this type of forbearance, your provider cannot deny your request.
Is patience the right choice?
It may be tempting to take the chance of not making any payments for any period of time. But we suggest taking a hard look at your situation before you take the leap. Think about the following questions:
Depending on your answers, you may decide to pursue patience. If you’re starting to think this isn’t for you, don’t despair — there are other options, most notably federal loans.
Strict endurance rules coming in 2027 (OBBBA)
Big changes are on the horizon. Starting July 1, 2027, new borrowers will face more stringent restrictions under the One Big Beautiful Bill Act (OBBBA).
New rule:
Only borrowers who take out federal student loans on or after July 1, 2027 can get them Up to 9 months of endurance during any 24 month period.
What does this mean
- Tolerance will still exist, but it is there Narrowed down to short-term use only.
- The goal is to prevent recurring “forbearance drift,” where borrowers cycle in and out of payments without reducing their balance.
- Critics argued that previous policies allowed borrowers to pause payments indefinitely, and even enable them “Borrow and die“Strategies Where the balances were never paid.
OBBBA rules encourage borrowers to use income-based repayment rather than long-term moratoriums that inflate total loan costs.
Better alternatives to tolerance
If you need a more sustainable plan, explore these options:
- Income-based repayment (IDR): Maximum payments are 5-15% of your discretionary income, with relief after 20-25 years.
- Extended payment plan: Repayment terms of up to 25 years, lowering your monthly payment.
- Refinancing: It can lower your interest rate and streamline multiple loans into one payment (best for borrowers with fixed income and good credit).
Frequently asked questions
Does taking on a student loan affect your credit score?
Not directly – the exemption itself does not appear as negative information on your credit report. However, if you miss payments before Your forbearance has been approved, and these missed payments can hurt your credit score. Always confirm your tolerance start date with your provider.
How long can you stay on a student loan?
Federal forbearance typically lasts for up to 12 months at a time and can be renewed for a total period of up to three years.
Under OBBBA rules beginning in 2027, new borrowers will be limited to 9 months during any 24-month period.
Do interest accrue during the forbearance period?
Yes – Interest always accrues On subsidized and unsubsidized loans during the forbearance period. If you don’t pay it back, this interest is added to your loan balance when the forgiveness expires (a process called capitalization).
What is the difference between tolerance and postponement?
The main difference is that in… delayThe government may pay interest on some loans (such as Direct Subsidized Loans), while they exist patienceYou are responsible for all interests. Deferrals are usually related to school, unemployment, or military service.
Can I qualify for Public Service Loan Forgiveness (PSLF) during forbearance?
No, firstly, you are not making any payments in advance. If you make an unwanted payment during the forbearance period, they willDon’t count About 120 batches qualify for PSLF. If you are seeking forgiveness, avoid unnecessary periods of forbearance.
What should I do if I can’t afford my student loan payments long term?
If your financial challenge is persistent, look into it Income-based repayment (IDR) Plans instead of patience. IDR plans base payments based on your income and family size, and may lead to loan forgiveness after 20-25 years.
Final thoughts
Forbearance can be a valuable safety net during difficult times but it is not a cure-all. Because benefits continue to accrue, they should only be used when absolutely necessary and for short periods.
If you’re having difficulties, talk to your loan servicer about all of your options, including deferment or income-based repayment. And if you’re borrowing after 2027, be prepared for tighter limits on how long you can pause payments.
Don’t miss these other stories:
AI still fails to forgive student loans
PSLF Checklist: What Student Loan Borrowers Should Do
Big changes are coming to student loan deferment and forgiveness
Editor: Clint Proctor
Reviewed by: Chris Mueller
The post Student Loan Forgiveness Explained: How It Works appeared first on The College Investor.
