Student Loan Forbearance: When is it Actually a Good Idea? | Student Loan Planner


You’re struggling to make your
payments on your student loans and you have the option of using
student loan forbearance and you’re wondering “is
this a good idea?” The answer is, it’s always an
indication that you need to fix your finances
so that you never, ever, ever have to do it again. But in some limited cases, student loan forbearance can be very
helpful. Let me explain why. Forbearance is offered up into two categories. One is general forbearance, which is at the discretion of your loan servicer, and then mandatory forbearance, which
is something that the loan servicer is
required to give you under certain circumstances. That is a little bit more rare. The main one that you’re going to be
using is general forbearance. The loan servicer will approve you
for this in 12 month increments. You get up to three years of
forbearance on your student loans for the
federal system. Now, when you get approved for this, you do not have to make payments. This is particularly useful for people who have a lot of credit
card debt. If you’ve got credit card debt at a 25% interest rate, if you put your student loans into
forbearance, yes the interest will compound and grow, but 25% is way worse than 6% or 7%. So the primary use for
forbearance, in my opinion, is to overhaul your finances and throw as much as possible at
your consumer debt that’s at a higher interest
rate so that you can pay it down rapidly and get an emergency fund of at
least $10,000 in the bank. At that point, you would want to
restart your payments on an income driven option until you get on your feet better and are able to craft
a long term plan for your student loans. We’ve seen student loan forbearance be
very helpful, and in some cases if you’ve already
exhausted your forbearance of three years, you’re able to get three more years
of forbearance by consolidating into a new direct consolidation loan, which allows you to get an additional three years
of forbearance. We would not recommend this. We just want you to know all of your
options. Forbearance is a little bit
different from deferment. Deferment lasts while you’re in
school, and deferment is something that is better than forbearance, because
deferment sometimes gives you the ability to have some
of your interests subsidized while
you’re not making payments. In general, deferment and forbearance are not a
good thing. You want to be making payments on
your student loans because of the generous terms
offered to you by one of the income driven
repayment options like Pay As You Earn or Revised Pay As You Earn. Forbearance is something to be used
in limited quantities as a shock to the heart to revive your financial life. If you’re utilizing it for that
reason to get rid of your credit card debt to
get an emergency fund, it has a place. Other than that, it does not. If you wanted to get a detailed look
at your situation because you’re struggling with your student loan debt, we make custom plans. Reach out to us with any of the contact links
on our website studentloanplanner.com.

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