2 years ago
As stated by Department of Education audit, in 2018, one of the US largest student loan servicing companies, steered thousands of struggling borrowers into costly delays of their payments. They are also known as "forbearances." Today, the Typical Student team is going to tell you about all the risks you should consider before pausing your student loan payments.
To start with, according to the Consumer Financial Protection Bureau, between 2010 and 2015, there were more than $4 billion added by Navient. It was needed to help the young borrowers. So why there are so many students who want to pause their student loan payments?
Actually, putting off payments increases student’s debt. However, there are over 70% of students and ex-students who only begin repaying their loans.
What Should You Do?
Before everything else, a borrower should make sure that a deferment is available before they opt for a forbearance, says Bruce McClary, vice president of communications at the National Foundation for Credit Counseling. On the other hand, when you feel that you’ll be able to repay your student debts, you may want to enroll in an income-driven repayment plan. To make a long story short, it caps your monthly payment at a percentage of the income.
Do You Need A Forbearance?
Many students who have a short-term difficulty are thinking if a forbearance is actually a nice idea. In case there’s a medical leave or temporary unemployment, you may want to consider forbearance. Usually, it lasts a year. By the way, any borrower can use it up to three times. According to Mark Kantrowitz, an expert on financial aid, you should request a partial forbearance and keep up with at least their interest payments during the break. "This will prevent your loan from growing larger during the forbearance," Kantrowitz said.
Keep up with the Typical Student daily email