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New Member
laurak
Posts: 8
Registered: ‎03-25-2009

Does forbearance hurt my credit?

I'm about to graduate medical school with $200k in SLs. Since I can't defer anymore, the loans will have to go into forbearance while I'm in residency.  Will this negatively impact my credit?
Regular Contributor
LYNNY47
Posts: 133
Registered: ‎03-28-2008

Re: Does forbearance hurt my credit?

I just recently took a 4 month forebearance on my consolidated parent plus loan with the Dept. of Education and it is not hurting my credit.  It was explained to me this is the reason you take the deferrment or forebearance so that it doesn't effect your credit.  I only wanted to not pay the loan until my son graduated and I was able to get an additional month to total 4 months and then I will resume paying the loan again.  Hope this helps.  Sometimes you need to call the customer service with your loan provider and they are very helpful at least they were helpful to me. 

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New Member
TiffLO
Posts: 4
Registered: ‎01-27-2009

Re: Does forbearance hurt my credit?

Hi LauraK,

I've had to do that a few times in my past, and it always reports "pays as agreed" and doesn't show as late.  It may not show a dollar amount, but I'm not sure if it did before anyhow.  If the lack of a dollar amount does affect the score, my guess is that it would be negligible, but I'm almost certain it has no negative effect on your credit score.

I can tell you though to triple-check that the forms were received when you send them, because I had paperwork get 'misplaced' so I was reported late before the forebearance on one occasion - that did ding my score.

Good luck!

New Member
smokem
Posts: 1
Registered: ‎04-23-2009

Re: Does forbearance hurt my credit?

Owing more than the orginal loan amount may hurt your credit score.  It is like going over your credit limit on a credit card.  Also an entry may appear stating in default not paying as agreed.  Your debt to income ratio can be skwed for they will figure a monthly payment when there is none reporeted based on 10 years instead of 20 or 30 years.  Take the hit an consoladate later on to raise your score or consider paying something like intrest only during forebarence. A legal question would be if your loans are federal and an adverse action was taking against you for exercsing a deferment granted to you under federal law?  Student laons use not to play such a factor because they had less risk due to the no bankruptcy provision.  Now lenders are hurting for cash flow and if you hurt them they will hit back.
New Member
TiffLO
Posts: 4
Registered: ‎01-27-2009

Re: Does forbearance hurt my credit?

@smokem

While owing more may indeed affect the score, they can not report you as in default for being in forebearance, that's wholly incorrect.  I consulted past years' credit reports before replying to this.  If they were to report it as you say, she could have it amended because default, by definition, means not in agreement with terms.  Forebearance is a modification in terms which the lender has accepted, ergo IN agreement with tersm.

 

If she is facing 200K in loans and just getting out of med school, chances are the payment EVEN AFTER consolidation would be too much, and once you do consolidate, you do not get to forebear or defer again.  It's a high-risk strategy with a permanent impact, where LauraK needs a temporary fix until things are better.

 

You should never stay in forebearance for too long, but consolidation, when cash flow is tight, is NOT the right move in this situation.  You do want to consolidate as soon as you know you will be able to make the payments, but not if you do not know how you will make the payments yet!

Valued Member
OTF
Posts: 43
Registered: ‎03-12-2009

Re: Does forbearance hurt my credit?

"once you do consolidate, you do not get to forebear or defer again."

 

THIS IS NOT TRUE ON FEDERAL LOANS(Staffords, Perkins, etc..!PRIVATE LOAN CONSOLIDATION IS ANOTHER STORY

 

While I was in med school I consolidated my federal loans when interest rates dropped back in 2004/2005 to then historic lows. After I consolidated they were put immediately back into deferment until I graduated med school. Now the loans are in forbearance and they are consolidated loans.

 

WORD OF ADVICE TO ALL:

 

Dealing with the federal governement is the best concerning loans. Always consolidate using the Dept of ED as your servicer and don't consolidate thru private companies under the fed program where a private company is the servicer. FEDS let you do your forbearnc/deferment paperwork online and they approve it within a couple of days compared to private companies. I know alot of med school friends that had a nightmare with private servicers. The FEDS do some things right! LOL

Valued Member
OTF
Posts: 43
Registered: ‎03-12-2009

Re: Does forbearance hurt my credit?

Why can't your loans defer during residency? What loans are they? All federal loans allow deferment during residency and from what I have seen most private loans allow it too. There is also economic hardship you can claim if your calculated payment is greater than a certain % of your income.
New Member
TiffLO
Posts: 4
Registered: ‎01-27-2009

Re: Does forbearance hurt my credit?

Thanks OTF - I meant forebearance only, deferment due to school I believe was still OK.  That was the case with federal loans too when I worked at the university back in 2003 and also when I finally consolidated back in 2005.  If I go back to school taking a minimum of 6 credits I can defer (not the same as a forebearance, where your subsidized loans still accrue interest but in a deferment they do not [rather the gov't pays it]).

 

 

Also excellent advice about who to consolidate with - there are some major scammers out there.

 

This is the website for Direct Loans:

http://www.ed.gov/offices/OSFAP/DirectLoan/student.html

They have info on forebearance, deferment, rates, etc.

 

It is possible that things have changed since I worked in a university setting, so best to check it out yourself.  But, back to the original question, they can not report you as defaulting if you are in either of those two because you are "paying" according to terms - the terms are simply that you have a "net 360" or something instead of a "net 30".

Valued Member
OTF
Posts: 43
Registered: ‎03-12-2009

Re: Does forbearance hurt my credit?

Loans in forbearance will report as "pay as agreed" or "deferred". They do not report as negative and will show up on your report under "accounts in good standing" and not as "negative accounts".
New Member
montanadem
Posts: 8
Registered: ‎03-25-2008

Re: Does forbearance hurt my credit?

I have been a student loan officer for 20 years and as long as you pay your interest payments on time while in forbearance you will be fine.  However, you are only allowed three years maximum.  Your loan officer should be able to continue to defer your loan based on proof of residency.  You may want to call them and ask what proof they need to do this.

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