Forbearance suspends student loan payments for a specific period, and usually is requested by a strapped borrower in need of temporary student loan relief.
But in some uncommon circumstances, loan servicers can place borrowers in automatic student loan forbearance. In fact, the March 2020 passage of the federal Coronavirus Aid, Relief, and Economic Security (CARES) Act initiated a new automatic administrative forbearance on federally owned student loans.
So when can automatic forbearance kick in, and how can it affect your student loan repayment? Here’s what you should know.
What Is Automatic Student Loan Forbearance?
Typically, general and mandatory student loan forbearances are granted at the borrower’s request with documentation of their need for relief.
The other type is administrative forbearance, which includes automatic forbearance.
“Administrative forbearances are the types of forbearance where the (U.S. Department of Education) secretary has discretion to put a borrower in forbearance without asking for additional documentation from the borrower,” Kyra Taylor, a staff attorney for the National Consumer Law Center’s Student Loan Borrower Assistance program, told The Balance via email.
An administrative forbearance can be granted at a borrower’s request or triggered automatically under specific circumstances.
Eligibility for administrative or automatic forbearance can vary among kinds of federal student loans. Direct loans, FFEL loans, Perkins loans, and HEAL loans are subject to different rules for forbearance.
When Is Automatic Forbearance Granted?
The guidelines governing automatic and administrative forbearance can be very specific and, frankly, complicated.
Administrative forbearance may apply in these situations below, but this is not an exhaustive list. Be sure to do your own research and contact your student loan servicer to discuss your eligibility. If your situation is complex, Taylor suggested seeking a student loan lawyer to advise you and protect your interests.
Coronavirus Administrative Forbearance
The CARES Act’s coronavirus student loan relief directed the Department of Education to grant automatic student loan forbearance on all federally owned student loans. With subsequent executive orders signed by Donald Trump and Joe Biden, this administrative forbearance period continues through Sept. 30, 2021, and suspends both student loan payments and interest. You can ask for the suspension to be removed if you can manage your loan payments during this pause.
This temporary suspension of student loan interest is unique to forbearance granted through the CARES Act. During most kinds of forbearance, student loan interest will still accrue.
On March 31, 2021, the DOE expanded its loan forbearance to include Federal Family Education Loans (FFEL). Any payments made between March 13, 2020 and Sept. 30, 2021 are eligible for reimbursement. Interest and penalties will not accrue, and wages or tax refunds garnished to pay the private loan owner will be returned to the borrower. In addition, if the loan was in default it will be restored to good status, and the credit bureau notified to remove any delinquency from your credit report.
Disaster or Emergency Forbearance
Borrowers who live in a declared federal disaster area can qualify for disaster forbearance. This is offered for up to 90 days (and can be renewed for 30 days at a time afterward) to assist borrowers affected by a natural disaster, such as a hurricane.
Servicers might put you into automatic forbearance if you live in a disaster area only after you miss payments.
Retroactive Forbearance or Deferment
In some cases, an administrative forbearance is granted for a past repayment period. According to Taylor, it’s commonly granted for the time when payments were overdue before an authorized deferment or forbearance began.
Loans Waiting for Discharge or Forgiveness
Some forms of student loan discharge or forgiveness require the Department of Education to review documentation and determine if the borrower is eligible. According to Taylor, the eligible federal student loans in question are typically put into an automatic administrative forbearance during this time.
For example, borrowers might be eligible for forgiveness of federal student loans they borrowed to attend a school that misled students or engaged in unlawful misconduct. If a borrower files a “Defense to Repayment” forgiveness claim, their federally held student loans must be automatically placed in forbearance.
The servicer might also receive notice of a borrower’s death or disability. At this time, it grants administrative forbearance on the borrower’s loans while it collects documentation for a death or disability to discharge the student debt.
How Will You Know If Automatic Forbearance Is Applied?
While you don’t need to make payments during a period of administrative forbearance, it’s important to pay attention to your student debt.
“If a servicer or the Department [of Education] initiates a forbearance, it should notify the borrower [via email or postal mail],” Taylor said.
If you learn your student loans were put into forbearance, Taylor advised calling your servicer. Check that the correct forbearance was applied to your loans, with no mistakes made. Ask about your next steps and due dates for renewing the forbearance or resuming payments, too.
Log into your student loan servicer account, or contact its team by phone for updates on your student loan status. Another option: Log in to the National Student Loan Data System (NSLDS) to view your student loan information, which is updated at least monthly.
The Implications of This Type of Forbearance
The CARES Act administrative forbearance differs from traditional forbearance in several ways. Interest is suspended, so this period of forbearance won’t end with an increase in your balance. This law also directs servicers to treat this forbearance period as if you made on-time payments when reporting it to credit agencies or tracking progress toward certain kinds of forgiveness, like Public Service Loan Forgiveness (PSLF).
Having student loans in forbearance will affect your repayment in a few ways:
- Longer repayment period: Because your payments are suspended now, you will need to make up those payments later—likely extending your repayment period.
- Interest accrual and capitalization: You won’t have to pay interest during your forbearance period, but Direct and FFEL loans still accrue interest during most kinds of forbearance. Unpaid interest is capitalized, or added to your balance, once you exit forbearance, increasing both your student loan balance and the total amount repaid.
- Missed progress toward forgiveness: PSLF requires you to make a certain number of student loan payments. Most types of forbearance won't count toward meeting these requirements. (The administrative forbearance granted in response to the COVID-19 pandemic is an exception.)
- Forbearance time limits: Depending on the reasons for your forbearance and the types of loans you have, forbearance can be granted for as little as 90 days or up to 12 months or more.
Should You Stay in Automatic Forbearance?
Automatic forbearance can provide important student loan debt relief, kicking in when borrowers might not have the ability to start the process on their own. But just because your servicer put student loans into forbearance doesn’t mean that’s best for your situation.
If you can afford to keep up with—and stay on track—with your student loan payments, it’s wise to do so. Sticking to your original, standard payments will help you get out of debt on time while avoiding extra interest charges.
You should also compare forbearance with other student loan debt relief options, like student loan deferment or an income-driven repayment plan, to find the best one for your specific situation.
“If a borrower learns that their account has been put into forbearance, but they do not want it in forbearance, they can call their servicer to ask that their loans be put back into repayment,” Taylor said.
You can also send payments during forbearance as well, which can be helpful if you can afford to make partial payments.