# Forbearance: Meaning, Who Qualifies, and Examples

## What Is Forbearance?

The term forbearance refers to the temporary postponement of loan payments, typically for a [mortgage](https://www.investopedia.com/terms/m/mortgage.asp) or student loan. [Lenders](https://www.investopedia.com/mortgage/mortgage-guide/mortgage-lenders/) and other creditors grant forbearance as an alternative to forcing a property into [foreclosure](https://www.investopedia.com/terms/f/foreclosure-filing.asp) or leaving the borrower to default.

[Mortgage lenders](https://www.investopedia.com/the-best-mortgage-lenders-11714101) and mortgage servicers may negotiate forbearance agreements because the losses caused by foreclosures or defaults typically fall on them.

### Key Takeaways

*   Forbearance is a temporary postponement of loan payments.
*   Lenders may grant forbearances instead of forcing the borrower into foreclosure or default.
*   The terms of a forbearance agreement are negotiated between you and the lender.
*   You must demonstrate a need to postpone payments, such as financial difficulties due to a major illness or job loss.

![Forbearance: The temporary postponement of loan payments.](https://www.investopedia.com/thmb/UcqdTecIrm-X1kRF4QP-9CUhms0=/1500x0/filters:no_upscale():max_bytes(150000):strip_icc()/forbearance.asp-1-FINAL-1-1-ef55af26c51549f29c33dd8b862319ee.png)

*— Investopedia / Joules Garcia*

## Understanding Forbearance

Although an option for any [loan](https://www.investopedia.com/the-best-personal-loans-for-bad-credit-8761245), forbearance typically applies to [student loans](https://www.investopedia.com/articles/personal-finance/100914/private-student-loans-international-students.asp) and mortgages. Forbearance helps struggling borrowers by giving them extra time to repay their debt.

However, forbearance can also help lenders, who risk losing money on [foreclosures](https://www.investopedia.com/terms/d/deed_in_lieu_of_foreclosure.asp) and [defaults](https://www.investopedia.com/terms/d/default2.asp). A [foreclosure](https://www.investopedia.com/terms/f/foreclosure-action.asp) occurs when a lender repossesses a home or property from the borrower due to nonpayment.

[Loan servicers](https://www.investopedia.com/mortgage-loan-servicer-change-8647152)—who collect payments but do not own loans—may hesitate to work with borrowers on forbearance relief because they do not bear as much financial risk as the lender.

### Forbearance Negotiation

The terms of a [forbearance agreement](https://www.investopedia.com/terms/m/mortgage_forbearance_agreement.asp) are negotiated between borrowers and lenders. The chances of getting an arrangement depend partly on the likelihood that you can resume monthly payments once the forbearance period is over.

The lender may approve a total reduction of your payment or only a partial reduction, depending on the extent of your need and the lender’s confidence in your ability to catch up at a later date.

In some cases, [the lender](https://www.investopedia.com/the-best-mortgage-lenders-for-bad-credit-11697459) may grant the borrower one of several options. These include:

*   A full [moratorium](https://www.investopedia.com/terms/m/moratorium.asp) on making payments for some time
*   Requiring the borrower to make interest payments but not pay down the principal
*   Allowing you to pay only part of the interest, with the unpaid portion added to your total debt—a process known as [negative amortization](https://www.investopedia.com/terms/n/negativeamortization.asp)

### Forbearance Under COVID-19

Forbearance may be mandated by law. For example, the federal [Coronavirus Aid, Relief, and Economic Security (CARES) Act](https://www.investopedia.com/coronavirus-aid-relief-and-economic-security-cares-act-4800707), passed and signed into law in March 2020 to address the economic fallout from COVID-19, included provisions for [student loan forbearance](https://www.investopedia.com/the-hidden-cost-of-student-loan-forbearance-might-be-more-than-you-expect-11755489). The law also made provisions for [mortgage payment forbearance](https://www.investopedia.com/is-mortgage-forbearance-a-good-idea-8635526) for struggling homeowners during the pandemic.  

> **Warning**
>
> Receiving forbearance doesn't relieve you of your financial responsibility, so you must still make up for the missed payments once your agreement ends.

## How to Apply for Forbearance

You should contact your [lender](https://www.investopedia.com/the-best-va-loan-lenders-11697437) or [loan servicer](https://www.investopedia.com/ask/answers/100314/whats-difference-between-mortgage-lender-and-mortgage-servicer.asp) to apply for forbearance. In most cases, you must demonstrate a need to put off payments, such as financial difficulties associated with a significant illness or job loss.

Since forbearance agreements are negotiated, lenders have a lot of discretion when it comes to deciding whether or not to offer help and the amount of help they will offer. Borrowers with a consistent on-time payment history may have better odds of getting approved for forbearance than those who have consistently [missed payments](https://www.investopedia.com/housing-counseling-services-8691982).

For example, a borrower who worked at the same company for 10 years without ever missing a mortgage payment is a good candidate following a [layoff](https://www.investopedia.com/terms/l/layoff.asp). This borrower would be particularly likely to receive forbearance if they are highly skilled and can land a comparable job within a reasonable period. A lender is less likely to grant forbearance to a laid-off borrower with a spotty employment history or a [track record of late or missed payments](https://www.investopedia.com/the-best-credit-counseling-services-8765076).

> **Tip**
>
> Another forbearance option is for the lender to temporarily reduce the borrower’s interest rate.

## Forbearance for Student Loans

Student loan forbearance was mandated as part of the CARES Act passed in March 2020. That legislation suspended [federal student loan](https://www.investopedia.com/articles/younginvestors/09/private-or-federal-student-loans.asp) payments, set interest rates to 0%, stopped collections on defaulted loans, and halted adverse reports to credit agencies.

This forbearance relief came to an end in 2023. Student loan interest began accruing again in September, while the first student loan payments since the pandemic were due in October 2023.

### Forbearance vs. Forgiveness

Forbearance shouldn't be confused with loan "forgiveness," though both provide relief to borrowers. Forbearance provides temporary relief, while forgiveness provides permanent relief. For example, the Biden Administration attempted to forgive up to $20,000 in student loan debt per borrower, but the Supreme Court blocked the [student loan forgiveness](https://www.investopedia.com/terms/s/student-loan-forgiveness.asp) plan in June 2023.

### The Saving on a Valuable Education (SAVE) Plan

**In August 2023**, President Biden introduced the Saving on a Valuable Education (SAVE) plan, an income-driven repayment option in which an estimated 1 million borrowers could qualify for $0 monthly repayments.

While on the surface the SAVE plan looked like forbearance, instead, the loans were technically in repayment. SAVE set monthly repayments at 10% of discretionary income for undergraduate borrowers and raised the discretionary income threshold to 225% of the federal poverty line.

As a result, a single borrower earning $32,800 per year would have a monthly student loan payment of $0, because they had discretionary income to repay their student loan. A family of four earning less than $67,500 per year would qualify for a $0 monthly payment.

**On July 18, 2024**, a federal appeals court blocked the SAVE plan until two court cases centered around the IDR plan can be resolved. The Department of Education moved borrowers enrolled in the SAVE plan into an interest-free forbearance while the litigation was ongoing.

It also outlined [options for borrowers](https://www.investopedia.com/how-save-plan-pause-affects-student-loan-borrowers-seeking-public-service-forgiveness-8686305) nearing Public Service Loan Forgiveness (PSLF)—borrowers can either "buy back" months of PSLF credit if they reach 120 months of payments while in forbearance or switch to a different IDR plan.

> **Important**
>
> As of 1/15/2025, a federal court prevented the U.S. Department of Education (ED) from implementing the Saving on a Valuable Education (SAVE) Plan and other income-driven repayment (IDR) plans. Also, the ED cannot forgive loans after years of payments under the SAVE, Pay As You Earn (PAYE), and Income-Contingent Repayment (ICR) Plans.Contact your loan servicer for details. If you're on a SAVE plan, you'll likely move to general forbearance until no later than September 2025 or when loan servicers are expected to begin moving borrowers back into repayment and will be allowed to recalculate payments.

Although private student loans do not qualify for forbearance under current laws or federal programs, some private lenders may offer some form of forbearance on their own.

## Forbearance for Mortgages

Mortgage forbearance is one way for struggling homeowners to avoid [foreclosure](https://www.investopedia.com/terms/n/non-reo-foreclosure.asp) when they cannot afford to make their [mortgage loan](https://www.investopedia.com/the-best-mobile-home-loans-11751689) payments. The lender must approve the terms of a forbearance, and not all borrowers will qualify.

If you are applying for mortgage forbearance, you should prepare to provide information detailing your financial situation.

### Forbearance Under the CARES Act

[Mortgage forbearance](https://www.investopedia.com/terms/m/mortgage_forbearance_agreement.asp) assistance was extended to consumers as part of the CARES Act. COVID-19 mortgage forbearance applied to all federally backed and federally sponsored mortgages. If your loan was backed by HUD/FHA, the USDA, or the VA, then the deadline for requesting an initial forbearance was extended until the COVID-19 National Emergency ended—which occurred in April 2023.

### Forbearance and the Homeowner Assistance Fund

The Homeowner Assistance Fund established by the [American Rescue Plan Act](https://www.investopedia.com/american-rescue-plan-definition-5095694) of 2021 provided nearly $10 billion for states and territories to offer relief to struggling homeowners through their housing departments. Mortgage forbearance periods through the Homeowner Assistance Fund have concluded.

## What Happens After Forbearance Ends?

Once the forbearance period is over, the borrower is usually responsible for making up the delinquent payments. The lender often works with the borrower to devise a plan to catch up on the debt.

Homeowners who received a COVID-19 forbearance for their [federally backed loan](https://www.investopedia.com/terms/f/fhaloan.asp) cannot be required to repay missed payments in a [lump sum](https://www.investopedia.com/terms/l/lump-sum-payment.asp) once the forbearance ends. Keep in mind that this may not be the case with other lenders.

Again, depending on the terms negotiated with the lender, the borrower may owe interest accrued during the forbearance period and possibly [late fees](https://www.investopedia.com/terms/l/late-fee.asp).

> **Warning**
>
> Mortgage lending discrimination is illegal. If you think you’ve been discriminated against based on race, religion, sex, marital status, use of public assistance, national origin, disability, or age, there are steps you can take. One such step is to file a report, either to the Consumer Financial Protection Bureau or the U.S. Department of Housing and Urban Development (HUD).

## Will Forbearance Affect Your Credit Rating?

Forbearance doesn't adversely affect your [credit rating](https://www.investopedia.com/terms/c/creditrating.asp). However, missing payments before contacting the lender and setting up the forbearance terms will most likely have a negative impact.

[Forbearance assistance](https://www.investopedia.com/terms/s/scheduledrecast.asp) offered to mortgage borrowers affected by COVID-19 was reported by lenders to [credit bureaus](https://www.investopedia.com/terms/c/creditbureau.asp) as required by the CARES Act. However, in certain situations, lenders were required to report your mortgage account as "current," thus protecting your [credit score](https://www.investopedia.com/the-best-credit-repair-companies-8763909).

## Will Forbearance Affect Refinancing?

Yes, if you are in forbearance, you cannot [refinance](https://www.investopedia.com/terms/r/refinance.asp) your mortgage since a missed payment will prevent your eligibility for [refinancing](https://www.investopedia.com/best-mortgage-refinance-companies-5092956) with most [banks](https://www.investopedia.com/the-best-online-banks-11722209), [credit unions](https://www.investopedia.com/the-best-credit-unions-8783335), or financial institutions. However, contact various mortgage providers since they may have their own rules and may consider your individual circumstances to refinance.

## How Do I Get Out of Forbearance?

Once your forbearance period ends, you owe the amount of money you missed, but there are [different options](https://www.investopedia.com/the-best-debt-relief-companies-8763179). Reinstatement means you will owe the entire amount all at once. Repayment allows you to bring your [mortgage](https://www.investopedia.com/articles/personal-finance/010815/mortgage-choice-quicken-loans-vs-your-local-bank.asp) up to date over time, usually 12 months. This is a repayment plan that you have agreed to with your mortgage servicer.

## The Bottom Line

Forbearance is a temporary suspension of loan payments for a set period, which typically applies to student loans or mortgages. Forbearance allows for a delay in your payments, but you cannot stop paying your loan entirely.

Also, a reprieve from paying a [mortgage](https://www.investopedia.com/mortgage-modification-vs-refinance-which-is-right-for-you-8668914) will not erase the debt. You may still need to pay the past due amount at the time of the grant of the reprieve and any interest that accrued during the suspension, depending on the issuer.

At the end of the grace period, you must pay the entire amount due on your mortgage when you started the suspension. If you cannot pay your loan after the temporary suspension, contact your lender to discuss your options.

> **Article Sources**
>
> 1.  U.S. Congress. “[H.R. 748 - CARES Act](https://www.congress.gov/bill/116th-congress/house-bill/748/text).” Sections 3513 and 4023.
>     
> 2.  Federal Student Aid. “[Student Loan Forbearance](https://studentaid.gov/manage-loans/lower-payments/get-temporary-relief/forbearance).”
>     
> 3.  Federal Student Aid. “[COVID-19 Emergency Relief and Federal Student Aid](https://studentaid.gov/announcements-events/covid-19).”
>     
> 4.  Supreme Court of the United States. “[22-506 Biden v. Nebraska](https://www.supremecourt.gov/opinions/22pdf/22-506_nmip.pdf).”
>     
> 5.  Bidenwhitehouse.archives.gov. "[The White House. "Fact Sheet: The Biden-⁠Harris Administration Launches the SAVE Plan, the Most Affordable Student Loan Repayment Plan Ever to Lower Monthly Payments for Millions of Borrowers](https://bidenwhitehouse.archives.gov/briefing-room/statements-releases/2023/08/22/fact-sheet-the-biden-harris-administration-launches-the-save-plan-the-most-affordable-student-loan-repayment-plan-ever-to-lower-monthly-payments-for-millions-of-borrowers/)."
>     
> 6.  Federal Student Aid. “[SAVE Repayment Plan Offers Lower Monthly Loan Payments](https://studentaid.gov/announcements-events/save-plan).”
>     
> 7.  U.S. Department of Education. “[Department of Education Updates on Saving on a Valuable Education (SAVE Plan)](https://www.ed.gov/save).”
>     
> 8.  U.S. Department of Education. "[Department of Education Updates on Saving on a Valuable Education (SAVE Plan)](https://www.ed.gov/higher-education/manage-your-loans/save-plan)."
>     
> 9.  Bidenwhitehouse.archives.gov. “[Bill Signed: H.J.Res. 7](https://bidenwhitehouse.archives.gov/briefing-room/legislation/2023/04/10/bill-signed-h-j-res-7/).”
>     
> 10.  U.S. Department of the Treasury. “[Homeowner Assistance Fund](https://home.treasury.gov/policy-issues/coronavirus/assistance-for-state-local-and-tribal-governments/homeowner-assistance-fund).”
>      
> 11.  Consumer Financial Protection Bureau. “[Get Homeowner Assistance Fund Help](https://www.consumerfinance.gov/coronavirus/mortgage-and-housing-assistance/help-for-homeowners/get-homeowner-assistance-funds/).”
>      
> 12.  Consumer Financial Protection Bureau. “[Mortgage Forbearance During COVID-19](https://www.consumerfinance.gov/coronavirus/mortgage-forbearance-during-covid-19-what-know-what-do/).”
>      
> 13.  Federal Trade Commission Consumer Advice. "[Mortgage Discrimination](https://consumer.ftc.gov/articles/mortgage-discrimination)."
>      
> 14.  Consumer Financial Protection Bureau. “[Protecting Your Credit During the Coronavirus Pandemic](https://www.consumerfinance.gov/about-us/blog/protecting-your-credit-during-coronavirus-pandemic/).”