Student Loan Forbearance and credit rating

VThornheart

Just as a quick question.... another post here got me thinking about it. I've got a small mountain of financial aid debt, and if things do turn south at my job I'll need all the spare money I can get. I know that I could apply for a forbearance at that point (so I can pay for things like rent and food if it comes to it), but I don't know what (if anything) that'd do to my credit rating. Anyone know if it'd affect it negatively?

Feral

Forbearance might minorly adversely affect your credit rating.

First off, you're accruing interest without making payments. That increases your current total amount of debt, which has a minor negative impact.

Second, depending on the lender and the credit agency, usually the loan will show up as being in good standing during the forbearance period. However, in some cases. it might show up as the loan was not paid during the forbearance period, in which case you'd need to write a letter to the credit reporting agency to explain that you were not in default, but in a negotiated forbearance period.

VThornheart

Ahh, cool dealin'. My loan is with the Feds, so I'll see if I can get more details from them. Hopefully it won't have to come to that. Thanks!

Crashtard

My federal loans are currently on 12 month defferments. They don't accrue interest that way. That's what you'll want to do if possible.

Daenris

Crashtard wrote: »

My federal loans are currently on 12 month defferments. They don't accrue interest that way. That's what you'll want to do if possible.

I believe that's only really an option for subsidized federal loans. Unsubsidized and private loans generally accrue interest while in deferment.

Theungry

I have put both Sallie Mae and Federal direct loans on forbearance at various points, and never had any credit issues whatsoever. Obviously, if you can get a deferment thats better, but a forbearance does not carry any risk other than increasing the principal on your debt.

VThornheart

Oh... I thought deferment was the term for the time you get after you graduate when you don't have to pay, and anything after that is forbearance. I obviously should've failed the exit quiz for the loans. I'll go back and do some more research on the subject.