What's Happening?
A significant increase in student loan borrowers pausing payments through deferments and forbearances has been observed. These options help borrowers avoid default and its consequences, such as credit score damage and wage garnishment. Deferments may prevent interest accrual on certain loans, while forbearances typically result in interest charges, making them costly.
Why It's Important?
The ability to pause payments is crucial for borrowers facing financial difficulties, preventing defaults and associated penalties. Understanding the differences between deferments and forbearances allows borrowers to make informed decisions about managing their debt. As student loan debt continues to impact millions, these relief options provide temporary financial reprieve.
What's Next?
Recent legislation will change the limits on forbearances, reducing the allowable period to nine months out of every 24 months starting July 1, 2027. Borrowers should explore deferment options first to minimize interest charges and consider long-term strategies for debt elimination.
