American College of Physicians: Internal Medicine — Doctors for Adults ®

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Why forbearance is a last resort for relief

Copyright 2002 by the American College of Physicians-American Society of Internal Medicine.

By Jason van Steenburgh

A lender incorrectly told Mary J. Fidler, ACP-ASIM Associate, a second-year resident at Northwestern University, that she didn't qualify for deferment—an interest-free break from making payments on subsidized loans—during residency. She ended up applying for economic hardship forbearance instead. This gave her a break from making payments, but not from accruing interest.

"My financial aid officer said, 'Everyone forbears'," she said. "I found out later I could have deferred. I was able to back defer and got six months' worth of interest back, but I should have deferred earlier."

Some lenders are more likely to push forbearance than deferment, because they can charge interest during forbearance. Be sure you know the facts about your loans before you get saddled with avoidable interest payments.

Only certain types of loans aren't eligible for deferment—those that come from a private source rather than a federal loan program. If you hold loans of this type, forbearance is a good option for reducing or delaying your payments while your income is low.

With federal student loans, you can use forbearance to reduce or delay payments once you've used up the maximum period of deferment. If you consolidate your federal loans, the clock may start over again, giving you the option to defer and forbear a second time. It's wise to check with your loan servicer.

"Consolidating your student loans may be necessary for debt relief. No more than 40% of what you make should be going to car payments, credit cards and student loans, advised Paula Craw, director of student financial services with the Association of American Medical Colleges. If you forbear, pay what you can toward the interest on your student loans to stop the principal from growing.

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