Student Loan Forbearance Options: What Most People Get Wrong

You’ve probably heard the rumors. Or maybe you’re one of the millions of people staring at a frozen student loan portal, wondering why your balance is growing even though you aren’t required to pay a dime.

Honestly, the world of student loan forbearance options has become a total mess over the last year. Between court battles and the massive overhaul triggered by the One Big Beautiful Bill (OBBB) Act, what worked in 2024 is basically ancient history now that we’re in 2026.

If you're still sitting in the SAVE plan forbearance, you're essentially in a "waiting room" that's about to get very expensive.

The SAVE Plan Forbearance Trap

Let's be real: that 0% interest period was a dream while it lasted. But as of August 2025, the music stopped. Even though you might still be in a mandatory administrative forbearance because of the legal drama surrounding the SAVE plan, interest is officially accruing again.

This is the big thing people miss.

A lot of borrowers think "forbearance" means "frozen." It doesn't. Not anymore. Unless you’re in a specific type of deferment (which we'll get into), that interest is ticking up every single day. If you owe $30,000 at 6%, you’re adding about $5 a day to your balance. That’s $150 a month just for the privilege of not paying.

Basically, if you stay in this SAVE limbo, you’re watching your debt grow while making zero progress toward forgiveness. Experts like Betsy Mayotte from The Institute of Student Loan Advisors have been shouting from the rooftops: if you’re pursuing Public Service Loan Forgiveness (PSLF), these months in SAVE forbearance likely do not count.

You're standing still while the finish line moves further away.

Student Loan Forbearance Options: The 2026 Reality Check

If you can't afford your payments right now, you have choices, but the "safety net" is getting a lot smaller. Under the OBBB Act rules taking full effect this July, the government is getting much stingier with how long they'll let you hit the pause button.

General Forbearance (The "Hardship" Stopgap)

This is what most people end up with. You call your servicer—whether it’s Nelnet, Aidvantage, or Mohela—and tell them you’re broke. They can grant you a discretionary forbearance.

• The Limit: It used to be 12 months. Now? Most forbearances are being capped at nine months within any two-year period.
• The Cost: Interest accrues. Always.
• The Benefit: It stops the immediate bleeding. If you’re at risk of wage garnishment (which the Department of Education resumed in early 2026), a quick 120-day forbearance can buy you time to rehabilitate your loans.

Mandatory Forbearance

There are times when a servicer must give you a pause. This includes things like:

1. Medical or dental internship/residency.
2. National Guard duty (if not eligible for military deferment).
3. Teaching service that qualifies for Teacher Loan Forgiveness.
4. Monthly debt that is 20% or more of your total monthly gross income.

The "RAP" Plan: The New Kid on the Block

Starting July 1, 2026, the new Repayment Assistance Plan (RAP) becomes the primary income-driven option. If you can't afford payments, the government wants you on RAP rather than in forbearance.

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• It scales payments from 1% to 10% of your income.
• It has an interest subsidy (kinda like the old SAVE plan) to stop balances from exploding.
• The Catch: Forgiveness takes 30 years. Yeah, you read that right. Thirty.

Why Deferment is Actually Better (If You Can Get It)

People use the terms interchangeably, but they shouldn't. Deferment is the "premium" version of a payment pause.

Why? Because for Subsidized Loans, the government pays the interest while you're paused. If you have a $5,000 subsidized loan and you go into Unemployment Deferment, you still owe $5,000 when you come out. In forbearance, you’d owe $5,000 plus months of interest.

But here’s the kicker: for any loans taken out after July 1, 2026, the OBBB Act is eliminating the Unemployment and Economic Hardship deferments.

If you have older loans, you’re grandfathered in. If you're a new student? You’re stuck with forbearance or the RAP plan. It’s a massive shift in how we handle financial "bad luck."

What About Private Student Loans?

Honestly, private lenders like SoFi or Sallie Mae don't care about the OBBB Act. They play by their own rules.

Most private lenders offer a "hardship forbearance," but it’s usually limited to 2-3 months at a time, with a lifetime cap of 12 months. And they almost always charge a fee. Plus, they'll capitalize the interest—meaning at the end of the pause, they add all that accrued interest to your principal, and then you start paying interest on your interest.

It’s a debt spiral. If you're struggling with private loans, refinancing to a lower rate is often a better "out" than asking for forbearance, provided your credit isn't trashed yet.

The Tax Trap Nobody Is Talking About

Here is the really scary part of 2026.

The American Rescue Plan’s tax-free treatment of student loan forgiveness expired on January 1. If you spend years in and out of forbearance and finally hit forgiveness under an income-driven plan, the IRS might consider that forgiven amount as taxable income.

Imagine having $50,000 forgiven but then getting a $12,000 tax bill the following April.

The only exception right now is PSLF, which remains tax-free. Everything else? It's a "tax bomb" waiting to go off. This makes the interest accrual during forbearance even more dangerous because it’s not just a bigger loan balance—it’s a bigger potential tax bill down the road.

Actionable Steps to Take Right Now

Stop waiting for the Department of Education to send you a friendly letter. They're backlogged and, frankly, overwhelmed by the transition to the new 2026 rules.

1. Check your interest: Log into your servicer (Mohela, Edfinancial, etc.) and look at the "accrued interest" line. If it's growing, your "free" pause is costing you.
2. Evaluate the IBR Plan: If you're in SAVE forbearance, you can still switch to the "old" Income-Based Repayment (IBR). It might result in a monthly payment, but it counts toward PSLF and stops the indefinite interest growth if you qualify for the partial financial hardship.
3. Consolidate Parent PLUS Loans: If you have Parent PLUS loans, you have until July 1, 2026, to consolidate them if you want to access any income-driven plans. After that, they are basically locked out of the RAP plan and other protections.
4. Use the Simulator: Use the Federal Student Aid Loan Simulator. It’s been updated for the 2026 RAP plan figures. Compare the 30-year RAP timeline against a 10-year Standard plan.
5. Pay the interest if you can: Even if you are in forbearance, you can make "interest-only" payments. This prevents the balance from "ballooning" and keeps your principal steady.

Forbearance is a tool, but in 2026, it's a double-edged sword. Use it for a month or two to get your feet under you, but don't let it become a permanent lifestyle. The cost of doing nothing is higher than it has been in decades.