The amount of the payment does not vary from one month to the next. As a result, monthly payments stay the same over the life of the loan. Advantages include ease in budgeting payments, no surprises., and no increase in the cost of the loan. Disadvantages include possibly higher level rates, even in a decreasing interest rate market. In instances where the borrower experiences economic difficulty, the forbearance provision helps avoid delinquency and default.
Interest accrues on all, including subsidized, loans during forbearance periods.
Borrower is responsible for repayment of accruing interest, but may elect to include the accumulating interest in the postponement of payment provisions. Accumulation and possible capitalization of unpaid interest during forbearance increases the total cost of the loan. Guarantors' include the U.S. Department of Health and Human Services, U.S. Department of Education, state agencies, and for private educational loans, insurance companies. The period of time that begins on the day that the educational loan borrower ceases to be enrolled at least half-time, and during which time payment is postponed according to the provisions of the original agreement. The grace period ends on the day the repayment period begins.