What’s the Difference Between Mandatory and General Forbearance?
If you’re looking for ways to make your student loan payment each month, the last thing you want to hassle with is the complicated terminology that comes with all of the choices, right?
Let’s take forbearance, for example. This option allows you to temporarily put your federal student loan payments on pause. But, that’s not the only thing you need to know.
Forbearance for federal student loans can be broken down even further into two categories: mandatory forbearance and general (or discretionary) forbearance.
Let’s discuss what forbearance is, and then go into the two types.
What is student loan forbearance?
Forbearance is the temporary relief from your obligation to make payments on your federal student loan.
Your lender may grant you a forbearance if you’re facing a financial hardship, such as a serious medical issue that leaves you unable to work.
However, it’s important to remember that during forbearance, your regular loan payments are put on hold, but the interest continues to accrue. In other words, the unpaid interest gets added to the principal. This increases the total amount you owe.
In order to get a forbearance on your federal student loan, you need to submit a request to your loan service provider.
Learn more about federal student loan forbearance.
What is mandatory forbearance?
If you meet the eligibility requirements for a mandatory forbearance, your federal loan servicer is required to grant you the forbearance. A forbearance may be granted for no more than 12 months at a time.
Eligibility requirements for Direct Loans and Federal Family Education Loan (FFEL) Program loans include:
- You are serving in a medical or dental internship or residency program.
- Payments on your federal student loans are greater than 20% of your total monthly gross income.
- You are serving in an AmeriCorps position for which you received a national service award.
- You are in a teaching position that would qualify you for teacher loan forgiveness.
- You qualify for partial repayments of your loans under the U.S. Department of Defense Student Loan Repayment Program.
- You are an active member of the National Guard, but you are not eligible for a military deferment.
What is general forbearance?
Your federal loan servicer can decide whether or not to grant your request for a general forbearance. That’s why it is often referred to as a “discretionary forbearance.”
General forbearances may be available for Direct Loans, FFEL Program loans, and Perkins Loans.
You can request a general forbearance if you’re experiencing a general hardship that doesn’t quite fall under the rules for mandatory forbearance. Some examples might include:
- Financial difficulties
- Medical expenses, or
- A change in employment that caused a drop in income.
Time limits on mandatory and general forbearance
It’s important to note that both a mandatory and general forbearance can be granted for no more than 12 months at a time.
Once the 12 month-period is up, you can apply for a new forbearance if circumstances require it.
Just know that your loan servicer can set a limit on the maximum period of time you can receive a general forbearance, but mandatory forbearance does not have a limit.
In any case, remember that forbearance may inflate the size of your loan, so it's best to avoid it if you possibly can. Learn how to lower student loan payments.
Thanks to Ian Atkins, Chief Financial Analyst at FitSmallBusiness.com, for his contributions to this article.