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What is a Forbearance?
A forbearance is a special arrangement made for financial hardship which allows you to stop making payments TEMPORARILY on your Federal Family Education Loan Program (FFELP) loans. If you meet the requirements, forbearance could change the terms of your student loan so you can postpone principal payments, extend the amount of time to repay your loans, or make smaller payments for a certain period of time. Interest will still accrue on your loans during the forbearance period; however, you may still make payments during the forbearance. Any interest outstanding at the end of the forbearance period will be capitalized (added to your principal balance). Remember, if no payments are made during the forbearance period, the balance of your loan will increase and your monthly payment after the forbearance may increase.
You may qualify for a forbearance if you:
- Are located in a designated disaster area.
- Are in a graduate fellowship program at an eligible school and have used the maximum two-year limitation for deferment.
- Have poor health or other personal problems affecting your ability to repay loans.
- Have a temporary financial setback or hardship.
- Are a conscientious objector serving in a civilian job in lieu of military service.
- Participate in full-time service required by certain religious organizations.
- Have a spouse in the military service.
Did you know?... As of July 23, 1992, lenders are required (at a borrower's
request) to provide a three-year annual renewable forbearance if the borrower's
student loan payment exceeds 20% of his/her gross monthly income.
While your loan is in a no-payment forbearance status, interest continues to accrue. You will receive an interest billing at the end of each quarter. If this interest isn't paid by you before the forbearance expires, it will be capitalized (added on) to your loan balance. This process will increase your loan balance and your monthly payment amount when you resume regular payments.
If you reach the three-year limit, you will be required to make the regular payment each month. If payments are not made, the account will default, causing serious consequences. The following is an example of those possible consequences:
Judy Borrower took out a student loan for $11,500 and entered repayment with payments of $150 per month. She was unable to make the payments so she requested three separate no-payment forbearances, each one for twelve months. At the end of the 36 months, she had approximately $3,000 of interest that had been added to her principal balance, increasing it to $14,500, and her payment to over $190 monthly. She was no longer eligible to receive another forbearance, and unable to afford the high payments. Her loan defaulted, was assigned to the guarantor, and she was penalized with $3,190 in collection costs. Now she owed $17,690! Once the loan defaulted, she lost all deferment options. The guarantor garnished her wages and took her federal and state tax returns to collect the debt, took her professional license and reported the default to national credit reporting agencies.
Remember: A forbearance is a temporary solution that may be granted if we believe you are willing but unable to make payments. Abuse of this option can cause serious consequences!
If you are experiencing problems downloading the forbearance form, please
call 1-800-472-2166 ext. 5660 or e-mail to bndsl@nd.gov and a form will be mailed to you.
Your request should include your student loan account number and mailing address.
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