Postpone Your Loan Repayment

   HOW TO POSTPONE YOUR LOAN REPAYMENT

If you have financial problems or familiar circumstances that make difficult to repay every month your student loan, you should contact your lender immediately. The loan holders are able to provide you with some financing options and give you information about deferment and forbearance.

Under certain conditions, you can receive a deferment or forbearance on your loan, as long as the loan isn’t in default. A deferment allows you to temporarily postpone payments on your loan. If you have a subsidized loan, you won’t be charged interest during the deferment. If your loan is unsubsidized, you’ll be responsible for the interest. You can pay the interest as it accrues (accumulates), or it will be capitalized and the amount you’ll have to repay will increase.

For information on deferments available on loans received before that date, FFEL Stafford borrowers should contact the lenders or agencies holding the loans. Direct Stafford Loan borrowers can contact the Direct Loan Servicing Center at 1-800-848-0979. TTY users can call 1-800-848-0983. Or, you can go online at www.dl.ed.gov.

If you’re temporarily unable to meet your repayment schedule, but you’re not eligible for a deferment, your lender might grant you forbearance for a limited and specified period. During forbearance, your payments are postponed or reduced. Whether your loans are subsidized or unsubsidized, you’ll be charged interest during a period of forbearance. If you don’t pay the interest as it accrues, it will be capitalized. Deferment and forbearance are not automatic. If you have a Direct Stafford Loan, you must contact the Direct Loan Servicing Center to request either option. If you have a FFEL Stafford Loan, you must contact the lender or agency that holds your loan. You might have to provide documentation to support your request. You must continue making scheduled payments until you’re notified that the deferment or forbearance has been granted. Not making payments on your loan will have a negative effect on your credit rating, and your loan could go into default.

  Deferment

- If your loan is a subsidized one, you needn’t pay capital or interest during the deferment period. This applies to Perkins Federal Loans, Stafford FFEL Loans and Stafford Direct Loans, as far as they’re subsidized.

- If your loan is unsubsidized, capital repayment may be deferred but you’ll still need to repay interest. This applies to non-subsidized Stafford FFEL Loans, Stafford Direct Loans, Plus FFEL Loans and Direct Plus Loans.

Conditions to defer repayment:

- Continue your education at least part-time.

- Obtain a grant for a postgraduate program.

- Participate in a rehab program to help disabled people.

- Be unemployed.

- Be in a difficult economic situation.

How to apply for your loan to be deferred.

You can apply by filling in a form that you can obtain at your university’s financial aid department or at your financial institution (the one granting the loan). There are several types of forms depending on the economic situation. You must fill in one form for each loan you wish to defer.

After 2 or 3 weeks you get a letter approving your request. If you don’t, you must continue making your monthly payments. Deferring the loan repayment doesn’t mean you can just forget about paying it. When your current economic situation improves you’ll still need to continue paying your loan plus the accumulated interests.

  Forbearance

If you can’t fulfil you repayment obligations and a deferment has not been obtained, the student or his or her parents can still reduce or temporarily postpone payment. The difference between postponement and deferment is that when you just postpone you must always continue repaying interest, no matter if the loan is a subsidized one or not. If you fail to pay interest, the financial institution will add it to the capital, and the overal debt may become huge.

Under certain conditions you may obtain loan forbearance:

- Having certain health or some other personal problems.

- Being sent to reside in a medical institution.

- Working for community service.

- Having to repay certain federal loans with a combined monthly fee exceeding 20 % of gross income.

You need to keep repaying until you obtain written confirmation of your forbearance.

What can you do if you have already defaulted repayment?

To avoid the negative consequences of this violation of your loan contract obligations, there are several options:

- Student loan debt consolidation.

- Satisfactory Repayment Arrangement.

- Rehabilitation Program.

The financial institution or the federal government will let you know if you may use one of these formulas and under which conditions.

Conditions to cancel or reduce a loan debt

- Student death or total and permanent incapacity.

- Closure of the educational institution where the student was registered before he or she has ended the study program.

- Stafford FFEL and Direct Loans only: If the educational institution owes the borrower a reimbursement, if they have falsified your signature in the loan documents or if they have certified the loan without actually giving you the study program.

- Public service to the community (education, medicine, voluntary aid) as far as the actions conducted are formally classified as loan debt-removing.

Going bankrupt and formally filing to be so considered. But loan cancellation on bankruptcy is rare and will only happen if a court of justice rules that repayment would be excessive to the debtor, which is hard to obtain.