By Farnoosh Torabi | MainStreet.com
Many college students graduating in the next year face a double whammy: An average $20,000 in student loan debt and an overall shrinking labor market. For graduates in dire financial straits some lenders offer breathing room in the form of forbearance.
What is forbearance?
Student loan forbearance is essentially a temporary get-of-out jail card, whereby lenders may choose to let certain struggling borrowers either put their student loan payments on hold for a period of time, or extend the length of the repayment plan in order to reduce their monthly balance.
Who qualifies?
Forbearance is never a guarantee. Applicants must prove financial hardship that may include a low to non-existent income (i.e. unemployment), health problems, or other outstanding loans like credit card debt and/or medical bills. It also helps your case if you have dependents.
What’s the catch?
There is a downside. Under the rules of forbearance, the interest you avoid during the extended grace period piles onto the principal balance (i.e. the loan amount). Essentially, this means that once the forbearance period is over, your principal will have grown and on top of that, you’ll still need to pay interest.
Related:
Is Grad School Worth It?
Student Loan Justice
Student-Loan Woes Hurt Upper Middle Class
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