Forbearance is similar to student loan deferment, which also allows you to reduce payments on your federal student loans. The difference is that with deferment, interest does not accrue on certain types of loans, and with forbearance, it does. Deferment is also for a longer period of time than forbearance.
There are pros and cons to using forbearance for law school loans, and it’s important to fully understand what the process involves. Here’s what you need to know.
What Does Student Loan Forbearance Mean?
Student loan forbearance allows individuals who qualify, such as law school graduates experiencing financial difficulties, to temporarily postpone or reduce the payments on their federal student loans.
But there is a catch: Even though your payments stop temporarily, the interest continues to accrue on your student loans. After the forbearance period ends, you'll likely have a larger loan balance because of the accrued interest. That means you could end up paying more over the life of your law school loans. (With deferment, in comparison, interest does not accrue on some Direct Loans.)
Lawyers interested in forbearance need to apply for it using the General Forbearance Request from the Financial Student Aid Office. There are two main types of federal student loan forbearance: general and mandatory.
General Forbearance
With general forbearance, the loan servicer for your federal student loans has to grant your request. If you can't make your monthly payments due to financial difficulties, medical expenses, changes in your employment, or a significant reduction in income—perhaps you left a law firm to take a job as a public defender, for instance—your lender might approve forbearance.
Federal student loans eligible for forbearance include Direct Subsidized and Direct Unsubsidized Loans, Perkins Loans, and Federal Family Education Loans (FFEL).
Those who qualify for general forbearance can have their payments paused or lowered for up to 12 months. After that, they can reapply for another forbearance, but there is a cumulative forbearance limit of three years.
Mandatory Forbearance
With mandatory forbearance, as long as you meet the eligibility requirements, your loan servicer must grant your request. As a law school graduate, you may be eligible for this type of forbearance in certain situations, such as:
- The amount you owe each month for your federal student loans is 20 percent or more of your total monthly gross income for up to three years.
- You are providing legal services in an AmeriCorps position, for which you’ve received a national service award.
- You're a member of the National Guard and you’ve been activated by a governor but are not eligible for a military deferment.
You can receive mandatory forbearance for up to 12 months at a time, but it may be extended by request if you continue to meet the eligibility requirements.
Private Student Loan Forbearance
Some private lenders offer forbearance to lawyers with private student loans. Contact your loan servicer immediately if you need help with your payments.
Even if your lender doesn’t provide forbearance, they might be able to assist you in other ways, such as through interest-only payments, interest-free payments, or a new interest rate on your loans.
Who Should Use Law School Student Loan Forbearance?
Law school grads may want to consider forbearance if they fall into one of the mandatory categories or they’re facing financial, medical, or employment challenges that make it difficult to repay their student loans.
Is Student Loan Forbearance Bad?
Student loan forbearance isn't bad as a temporary measure. It allows you to pause or reduce your monthly payments, which could help you avoid defaulting on your student loans.
But what is less than ideal is that during forbearance, interest will continue to accrue on your law school loans. That means you may end up paying more overall.
Pros and Cons of Student Loan Forbearance
Forbearance may be helpful if you’re struggling financially, but there are drawbacks. Consider these pros and cons before making a decision.
Pros
- Forbearance can help you avoid going into default. The consequences of default for federal student loans may include: immediately owing the entire balance of the loan, damage to your credit score, garnishment of your wages, withholding of federal benefits and tax funds, and being taken to court.
- It doesn’t affect your credit score.
- Taking a pause from loan payments may give you time to work on improving your financial situation.
Cons
- Interest accrues during forbearance, which means you’ll likely have a larger loan balance when you resume repayment.
- If you’re pursuing federal student loan forgiveness, the time you spend in forbearance probably won’t count toward meeting forgiveness requirements and could set you back.
- Forbearance is only a temporary solution.
Alternatives to Forbearance for Law School Student Loans
Forbearance is just one way to get some relief from law school student loan debt. These are some other options to consider that may be better for your situation.
Income-Driven Repayment Plans
Federal income-driven repayment (IDR) plans set a lawyer’s monthly student loan payment based on their income and family size. There are four income-driven repayment plans:
Each plan has specific requirements you must meet to qualify.
Public Service Loan Forgiveness (PSLF)
Lawyers who work in the nonprofit sector or for the government and are enrolled in a qualifying loan repayment plan, such as an income-driven plan, may qualify for Public Service Loan Forgiveness. Those who are eligible can get their remaining Direct Loans forgiven after they make 120 consecutive qualifying monthly payments over 10 years.
Deferment
Federal student loan deferment allows qualified law school grads to postpone making payments on their loans for up to three years. You must apply for a deferment and be approved by your loan servicer. Interest will not accrue during deferment if you have subsidized federal student loans. However, interest does accrue on unsubsidized federal loans.
Loan Repayment Assistance Programs (LRAPs)
An LRAP provides financial assistance for law school graduates working in the public interest sector, government, or lower-paying legal fields. Repayment assistance varies, but funds may be given as a forgivable loan that is canceled once the individual’s service obligation is complete. LRAPs can be offered by law schools, the federal government, and state governments and bar foundations.
State Loan Repayment Assistance
Many states offer loan repayment assistance through LRAPs specifically for law school loan forgiveness. Recipients need to work in the state and generally must be employed by a nonprofit or the state government or work in an underserved area. Guidelines vary by state.
Department of Justice Attorney Student Loan Repayment Program
Lawyers who work for the Department of Justice may be able to get law school loan forgiveness through the Department of Justice Attorney Student Loan Program. They must commit to three years of full-time employment and have at least $10,000 in eligible student loans.
Student Loan Refinancing
Some law school grads might want to think about student loan refinancing, depending on their circumstances. With refinancing, borrowers take out a new loan with a private lender and use it to pay off their current loans. Those who qualify may be able to get a lower interest rate on the loan or a longer repayment term that could reduce their monthly payments. However, a longer repayment term, while possibly lowering monthly payments, generally results in paying more interest over the life of the loan.
Refinancing law school loans might be a helpful option for lawyers with a solid income and strong credit. However, it’s important to be aware that refinancing federal loans with a private lender makes the loans ineligible for federal protections, repayment programs, and forgiveness. For a lawyer hoping to use any of these programs, refinancing likely wouldn’t be the right choice.
The Takeaway
Using forbearance to temporarily suspend your law school student loan payments is an option if you are experiencing financial hardship. But interest will accrue on your loans and be added to the loan amount, meaning you’ll have an even larger amount to pay back.
Fortunately, there are other options to explore. An income-driven repayment plan, Public Service Loan Forgiveness, deferment, or repayment programs offered by your state or law school or the federal government might be better alternatives for you. If you don’t need access to federal programs and protections, you might also want to consider law school loan refinancing.
Taking the time now to determine the best way to get assistance with your loan payments can help you get a handle on your financial situation—and allow you to plan for a successful legal career ahead.
