Quick answer

Forbearance pauses or lowers monthly payments temporarily, but interest usually continues to accrue. That accrued interest can be added (capitalized) to your principal when the forbearance ends, increasing future interest charges and monthly payments. Importantly, most periods in forbearance do not count toward federal forgiveness programs like Public Service Loan Forgiveness (PSLF) or the payment-count required for Income‑Driven Repayment (IDR) forgiveness, so taking forbearance can lengthen the time until forgiveness.

(Sources: U.S. Dept. of Education, StudentAid.gov; Consumer Financial Protection Bureau)

How interest accrues during forbearance and what capitalization means

  • Interest continues to accrue on unsubsidized federal loans and virtually all private student loans while you’re in forbearance. For subsidized federal loans, interest does not accrue during a qualifying deferment but does during forbearance. (Source: https://studentaid.gov/manage-loans/repayment/forbearance)

  • Accrued interest may be capitalized (added to your principal balance) at the end of the forbearance or when you move to a different repayment status. Capitalization increases your principal and makes future interest charges larger because interest is calculated on the now-higher balance.

Example: If you have a $30,000 unsubsidized loan at an interest rate of 5% and you enter a 12-month forbearance, about $1,500 in interest accrues. If that $1,500 capitalizes, your new principal becomes $31,500 and next year’s interest is calculated on $31,500 rather than $30,000.

How forbearance interacts with forgiveness programs (PSLF and IDR)

  • PSLF: Qualifying payments for PSLF must be made while employed full‑time by a qualifying employer and under a qualifying repayment plan. Months in forbearance generally do NOT count toward the 120 qualifying payments required for PSLF. There were temporary waivers in recent years that allowed some non‑qualifying months to count, but those were limited‑time measures; don’t assume forbearance months count without checking current rules and any active waivers. (Source: https://studentaid.gov/manage-loans/forgiveness-cancellation/public-service)

  • IDR forgiveness (20–25 year forgiveness): To accrue credit toward IDR forgiveness, you must make qualifying monthly payments under an IDR plan. Months in forbearance typically do not count as qualifying payments because you are not making the required payments during those months. Some borrowers may be able to preserve eligibility by making partial payments or switching to an IDR plan early. (Related: see our guide on How Forbearance Affects Income-Driven Repayment Eligibility).

  • Private loans: Most private loan servicers do not offer forgiveness programs; forbearance can still increase balances but won’t help toward any federal forgiveness timeline.

Real-world scenarios and numeric examples

1) Short-term forbearance (6 months): debt grows but damage can be limited

  • Loan: $20,000 at 6% interest
  • Accrued interest in 6 months: roughly $600
  • If not capitalized, interest continues to compound; if capitalized, principal becomes $20,600 and future interest is higher.

2) Long-term or repeated forbearance (several years): costs compound

  • Loan: $40,000 at 5% with repeated forbearance totaling 24 months spread across 5 years.
  • Accrued interest after 24 months ≈ $4,000 (depends on capitalization timing)
  • Capitalization magnifies later payments and delays reaching forgiveness if you are on PSLF or IDR, because fewer qualifying payments are being recorded.

3) Public service worker considering PSLF: the big risk

  • A borrower aiming for PSLF needs 120 qualifying payments. Twelve months in forbearance (if they do not count) is one full year not counting toward PSLF. That can push the forgiveness date out and increase total interest paid in the meantime.

Practical strategies and alternatives (professional guidance)

In my experience advising borrowers for 15+ years, forbearance is useful as a last-resort short-term fix. Here are steps and alternatives I recommend you consider before accepting forbearance:

  1. Evaluate income-driven repayment (IDR) first
  1. Consider deferment if eligible
  • Deferment can be preferable for subsidized loans because interest may not accrue during deferment; check loan type and eligibility.
  1. Make interest-only or partial payments during forbearance
  • If you can, continue paying at least the accruing interest to prevent capitalization. That preserves your principal and reduces long-term cost.
  1. Ask your servicer about alternate solutions
  • Ask whether there are hardship plans, modified repayment schedules, or temporary reduced payment options that still count as qualifying payments for forgiveness programs.
  1. Keep documentation and confirm counting
  • For PSLF, submit employer certification forms annually and after any changes in employment to ensure payments are tracked. Record dates and ask the servicer in writing whether forbearance months will count.

What to do during and after forbearance

  • Track accrued interest: request a statement showing interest accumulated during forbearance.
  • Plan for capitalization: find out when capitalization will occur and how it will affect your new payment.
  • Re-enroll in a repayment plan before forbearance ends, if possible, to avoid an abrupt payment spike.
  • If seeking PSLF, confirm your payment counts after returning to repayment and, if available, use the PSLF Help Tool and submit the Employer Certification Form annually. (Source: https://studentaid.gov/manage-loans/forgiveness-cancellation/public-service)

Common mistakes and misconceptions

  • Mistake: “Forbearance won’t affect my forgiveness timeline.” In most cases, it will delay forgiveness if months are not qualifying. Always verify with your servicer. (CFPB explains common misunderstandings: https://www.consumerfinance.gov/ask-cfpb/what-is-student-loan-forbearance-en-1994/)

  • Mistake: “Forbearance won’t cost me more.” Interest accrual and capitalization often raise the long‑term cost and monthly payments.

  • Mistake: “Federal emergency pauses (like the COVID-19 pause) are the same as forbearance.” They are different. The COVID-19 administrative forbearance (0% interest pause) was a special, time-limited measure that is not permanent. Do not assume similar relief will be available in the future.

Short checklist before you accept forbearance

  • Confirm whether interest accrues during the forbearance.
  • Ask whether the forbearance period will count toward any forgiveness program.
  • Explore IDR, deferment, or temporary reduced-payment options instead.
  • If you have subsidized federal loans, check whether deferment is available (interest treatment differs).
  • Get written confirmation from your servicer about capitalization timing.

Tax and broader financial considerations

  • Tax: Historically, forgiven student loan debt could be taxable income. Under the American Rescue Plan Act (ARPA), certain qualifying student loan forgiveness has been excluded from federal taxable income through tax year 2025; check current IRS guidance and consult a tax advisor about your situation and state tax rules. (See IRS and consult a tax professional.)

  • Credit reporting: Forbearance itself typically will not damage your credit score if it’s a voluntary, agreed-upon arrangement with your servicer; however, higher balances and longer repayment periods can affect your debt-to-income ratio and future credit opportunities.

Frequently asked questions (short answers)

Q: Does forbearance stop interest from accruing?
A: Usually no — interest continues to accrue on unsubsidized federal and most private loans during forbearance.

Q: Will months in forbearance count for PSLF or IDR forgiveness?
A: Generally no. PSLF and IDR forgiveness require qualifying payments; months in standard forbearance typically are not qualifying unless a specific waiver or rule says otherwise.

Q: What if I can’t afford payments at all?
A: Consider servicer-negotiated hardship plans, IDR, or short-term forbearance as a last resort. Keep paying interest if possible to avoid capitalization.

Where to find authoritative help

Internal resources on FinHelp

Professional disclaimer

This article is educational and reflects general rules and professional experience. It is not individualized legal, tax, or financial advice. Rules, waivers, and tax treatment change; confirm details with your loan servicer, the U.S. Department of Education, or a licensed professional for your specific situation.