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Forbearance
Definition
Temporary reduction or pause of loan payments with interest accruing on all loan types.
Explanation
Forbearance allows stopping or reducing payments temporarily (up to 12 months). Unlike deferment, interest accrues on ALL loans during forbearance — including subsidized. Accrued interest may be capitalized after forbearance ends.
Forbearance is used when you don't qualify for deferment. Use it as a last resort since interest continues accumulating on the full balance.
Example
Borrower requests 6 months forbearance. Payments stop but interest accrues at $200/month. After 6 months, $1,200 in interest is added to principal.