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.
Deferment
If your loan is a subsidized one, you needn’t pay capital or interest during the deferment period. This applies to Federal Perkins 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 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.
Loan forgiveness
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