Forbearance

The borrower contacts the servicer, explains the hardship, and requests forbearance. The servicer may require a form or supporting documents. If approved, payments are suspended or reduced for a stated period (often up to 12 months at a time). At the end of the period the borrower must resume payments or request another arrangement. Capitalized interest is added to the principal.

Example: a borrower experiencing temporary job loss requests discretionary forbearance. The servicer approves a six-month postponement. Interest accrues on both subsidized and unsubsidized balances. When the forbearance ends, the capitalized interest raises the total amount owed and the monthly payment under the standard plan increases slightly.

Deferment stops payments under defined regulatory categories and can halt interest on subsidized loans. Income-driven repayment plans lower the required payment (sometimes to zero) while keeping the loan in active repayment status. Forbearance is a short-term relief tool, not a long-term repayment strategy.

Using repeated forbearances instead of enrolling in an income-driven plan, which can cause rapid balance growth through capitalization. Assuming forbearance pauses interest the way some deferments do. Failing to re-apply before the approved period expires.