Student-loan borrowers may be racking up billions of dollars in extra debt needlessly.

That’s one conclusion from a report on consumer credit released Monday by personal-finance site NerdWallet. Roughly 2.6 million borrowers with an average balance of $43,538 were in forbearance on their federal student loans last quarter — a status that allows borrowers to pause payments, but where interest still builds, according to NerdWallet’s analysis of government data.

‘Borrowers aren’t understanding the implications of forbearance.’ —Teddy Nykiel, NerdWallet’s student loan expert

It’s hard to say exactly how much forbearance is costing borrowers because there’s little official data on why they enter forbearance or how long they stay there, but NerdWallet took a stab at providing an estimate:

• If these borrowers started out with the average balance, remained in forbearance for 12 months and had loans with a 5.05% interest rate — the current rate for undergraduate federal student loans — they’d pay an extra $2,199 individually and $5.72 billion collectively.

• And it appears borrowers may not understand how costly forbearance can be. Roughly two-thirds of the 2,008 adults surveyed The Harris Poll on behalf of NerdWallet said they didn’t know that interest accrues at the regular rate when a federal student loan is in forbearance.

“Borrowers aren’t understanding the implications of forbearance,” said Teddy Nykiel, NerdWallet’s student-loan expert.

But there are other reasons, besides a lack of knowledge, why borrowers may be winding up in forbearance. The NerdWallet report is just the latest to highlight the relatively widespread use of forbearance, despite that the federal government offers other options that often wind being less costly to borrowers.

By advising former students struggling to repay their loans to enter forbearance, consultants can help colleges lower the rate of former student default rates.

A cottage industry of consultants hired by colleges to help them manage their regulatory risk often winds up pushing borrowers towards forbearance, according to a report released this year by the Government Accountability Office. Colleges at risk of losing access to federal financial aid because too high of a share of their students are defaulting on their student loans will often hire these consultants. By advising former students struggling to repay their loans to enter forbearance, the consultants can help lower the rate of a college’s former students in default.

Borrower advocates, states attorneys general and others have also alleged that student-loan companies steer struggling borrowers towards forbearance because it takes less time for representatives to put their loans into that status than to evaluate their repayment options.

Experts advise borrowers to make themselves aware of their options before they even call their student-loan servicer to make sure they don’t wind up in forbearance unwittingly.

Nykiel advises borrowers make themselves aware of their options before they even call their student-loan servicer to make sure they don’t wind up in forbearance unwittingly. Income-driven repayment programs allow borrowers to repay their loans of as a manageable percentage of their income, allowing them to at a minimum chip away at the interest on their loans, and work towards forgiveness, benefits not available in forbearance.

If they only offer you forbearance and they don’t mention an income-driven repayment option, ask about the latter, Nykiel said. In some cases, borrowers may be put in an administrative forbearance temporarily while their loan servicer collects the documentation necessary to move them into a new repayment plan.

Borrowers pursuing a medical or dental residency also have the option of putting their loans in forbearance during that time, but if they can afford to make payments under an income-driven plan, Nykiel suggests they do it. These borrowers often have high balances, so the interest accumulation can be particularly costly.

There are some circumstances where forbearance may be appropriate such as a medical emergency that makes it difficult for the borrower to work for a period, Nykiel said. But borrowers should “try to limit it as much as possible,” she added.

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