College Loan Unemployment Forbearance Programs–Will Delaying Payments Help Distressed Graduates?

College loan assistance for unemployed individuals through forbearance programs have been offered in the past as a way to help young men and women who have graduated with substantial amounts of debt by allowing them to forgo making payments for a short period of time, or a longer stretch if needed in certain cases. Yet, this has led to some problems as there are not only graduates who are facing a sizable amount of debt and a very difficult employment situation currently present in our economy, but there are also some who are seeing higher overall costs as a result of delaying their payments through the forbearance programs.

However, students question whether forbearance programs should be avoided altogether or if they may be helpful in some cases, and this will usually depend on not only the student’s financial position and the amount of debt they have, but also how long they will be in it forbearance and how this will impact the principal amount on their loan. Obviously, if a student only needs a few months of forbearance, this could work to their advantage as missed payments, delinquency, or default on student loan debts could be a major hindrance in the financial life of any young consumer, so foregoing payments for a short period of time may not be that bad, but again it will depend on the student and their situation.

Yet, it’s plain to see why some graduates gravitate towards this forbearance opportunity, particularly when unemployment is in place, simply because they miss payments or financial setbacks as a result of being unable to honor this debt is something that graduates wish to avoid and since federal forbearance programs can be helpful in this aspect, many see this as a way to alleviate this form of financial distress in their life for at least a short period of time. However, it’s because the federal student loans may be able to offer a forbearance for a substantial amount of time for those in need that we have seen some fall into a position where this actually increases their overall debt.

The decision of whether one should take advantage of these forbearance options is a personal conclusion that a student must reach after graduation, but in some cases if a student delays their payments, the interest that has accrued may be added on to their principal once they have ended their period of forbearance, and a higher principle amount can lead to both a longer repayment timeframe and higher overall costs. Understandably though, no graduates wants to default on these loans or miss payments as they could go against their credit or in some extreme cases graduates may have wages garnished if they fail to repay this obligation, but of course in times of financial distress or unemployment many see this option as helpful rather than a path that could lead to potential increased costs.

For those who are currently facing a high amount of student loan debt, speaking with a lender and exploring repayment options that include but go beyond forbearance may be helpful but financial aid counselors are still warning current students and those who plan to enter college in either the spring or fall of 2012 to be sure they are well prepared when it comes to financial aid that will not require relying too heavily on these loans.