It is not difficult to request a student loan forbearance, and as such it is one of the first options graduates choose when they are unable to pay their loans. However, it is important to carefully analyze your financial situation, and determine how forbearance will impact you in the future. Here, the student loan specialists at Scholnick Law explain what graduates should consider before choosing student loan forbearance.
Student loan forbearance allows student loan payments to be temporarily stopped or lowered. While it can be a valuable tool to prevent default, the decision to ask for forbearance should be made carefully. Here is what you should consider first:
What is Your Current Financial Situation, and How Will It Change in the Near Future?
An unexpected event, such as a car accident, medical emergency or job layoff can wreak havoc on your budget. If something occurs that prevents you from paying your student loans, it may be tempting to request forbearance. However, if you foresee your financial situation improving in the near future, it is more advantageous to speak to the loan provider directly, and see if they can temporarily alter the terms of the loan. This is because forbearance is only available for a specific amount of time—usually only three years for federal loans—and interest continues to accrue during a forbearance period. This will make your loan even more costly, and may prevent you from using your forbearance at a time where you truly have no other option.
Can My Budget Be Restructured to Better Accommodate My Loan Payments?
Those who have recently graduated college are often on a tight budget, and paying off a hefty student loan may seem like too much of a burden. However, before requesting forbearance, analyze your budget and see if there are any unnecessary expenditures that could be rerouted towards paying off your student loans. If you have not created a budget, now is the time to do it—a detailed analysis of your expenses can help you understand exactly where your income is going. The longer a loan takes to be paid, the more interest accrues, making the loan more and more expensive, so any changes that can be made to your budget to help pay the loan off faster should be taken.
Am I Eligible for Deferment Instead?
If you have subsidized Stafford Loans, deferment of your loans is preferable to forbearance. This is because when you request deferment, the interest that would normally accrue is instead paid by the federal government. You must meet specific criteria in order to qualify for deferment; these criteria include unemployment, extreme economic hardship, at least half-time school enrollment or active military duty. If your loans are unsubsidized, interest will continue to accrue as normal. Also, anyone with a federal student loan has the right to ask for deferment, and cannot be rejected if they qualify—forbearance is usually at the discretion of the loan provider, unless the borrower can prove that their loan payments are equivalent to more than 20% of their income.
Have I Spoken with a Student Loan Specialist?
The attorneys at Scholnick Law are experienced with handling student loan debt, and know the best steps to take to help mitigate the effects of having student loans. Don’t let student loans impact your quality of life, and do not make any serious decisions about your loans before consulting a professional—contact Scholnick Law today for more information.