An administrative forbearance is a temporary postponement of your student loan payments, granted by your lender. There are two types of administrative forbearances -- general and mandatory. A forbearance can be granted by your lender in conjunction with several different Department of Education programs or for a temporary financial difficulty. Mandatory forbearances are initiated by the Department of Education and are not subject to the lender's discretion.
Forbearance
A forbearance on your student loan is a temporary suspension of the requirement to make payments. Unlike a deferment, during a forbearance your interest continues to accrue. Unless you make interest-only payments during the forbearance period, the interest is capitalized when you are required to resume your payments. Capitalized interest is accumulated interest added to your principle that is subject to interest thereafter. For example, if you owed $3,000 and interest was charged at $20 per month, after a three-month forbearance your principle would increase to $3,060 at the end of the forbearance period. Interest would then be charged on $3,060 instead of $3,000.
Administrative Forbearance
There are several types of administrative forbearances, all with their own requirements and maximum length. The administrative forbearances available are Americorps, general, internship/residency, loan debt burden or teacher forgiveness forbearance. The general and loan debt burden forbearances are the two that are awarded based on financial need. The internship/residency and teacher forgiveness forbearances require that you are either continuing your medical education -- the internship/residency program -- or you are teaching at a low-income elementary or high school and meet other criteria.
Mandatory Administrative Forbearance
You must be granted an mandatory administrative forbearance if you can't make payments due to circumstances beyond your control. Under a mandatory administrative forbearance, you do not have to make the request; it is automatically granted. Your lender must send you notification that the forbearance was granted, and you can choose to opt-out and continue making your payments. If you are subject to involuntary military mobilization, live in a designated disaster area or are involved in a local or national emergency, you are automatically granted this forbearance. If your are in arrears on your payments, this will not resolve that situation.
Forbearance Diffrerences
Each administrative forbearance has different requirements and renewal options. For example, for the Americorps forbearance, you must be engaged in service associated with the Corporation for National Community Service, and the maximum forbearance term is 36 months. For the teacher forgiveness forbearance, you must work for five years under the qualifying conditions, and the forbearance must be renewed every 12 months. Check the terms of the forbearance to see if you qualify.
