|
CHAPTER THREE
DEFERMENT PROVISON
DEFERMENT PROVISIONS FOR THE FEDERAL STAFFORD LOAN SUBSIDIZED/
UNSUBSIDIZED
Authorized deferment(s) must not be granted until the grace
period expires. Deferment(s) are not automatic‚ the borrower
must apply through the lender/servicer. A borrower must provide
the required documentation to verify his/her eligibility.
If a borrower’s loan is in default‚ he or she is
not eligible for any deferments on that loan‚ unless
the borrower has made acceptable repayment arrangements with
the lender prior to the payment of a default claim by a guarantee
agency.
DEFERMENT PROVISION FOR LOANS DISBURSED PRIOR TO 07/01/93
-
At least half–time students at an eligible post
secondary school. (Prior to 7/1/87 only available to
full time students).
-
Study in an eligible graduate fellowship program or
in a rehabilitation training program for the disabled.
-
Up to 3 years of active duty in the United States
Armed Forces or as an officer in the Commissioned Corps
of the U.S. Public Health Service (including any combination
of such periods of service).
-
Up to 3 years during which the borrower is temporarily
totally disabled‚ or during which time the borrower
is unable to secure employment because he or she is
caring for a spouse who is temporarily totally disabled
(including any combination of such periods).
-
Periods of unemployment totaling up to 2 years‚
if during those periods the borrower is seeking but
unable to find full–time employment.
-
For periods not exceeding 6 months when the borrower
is pregnant or caring for a newborn child or caring
for his or her adopted child immediately following adoption.
The borrower must be unemployed and not attending school
and must apply within 6 months after he or she leaves
school or drops below half time status.
DEFERMENT PROVISIONS FOR LOANS DISBURSED AFTER 07/01/93
Refers to loans first disbursed on or after 07/01/93 to borrowers
who have no outstanding Federal Stafford Loans or Federal
Supplemental Loans for Students on the date they signed the
promissory note.
A borrower is considered to have an economic hardship if
the borrower:
a) is receiving payment under a federal or state public assistance
program.
b) is working full–time but earning a total monthly
gross income that does not exceed (the greater of):
Federal minimum wage‚ or
An amount equal to 100% of the poverty line for a family
of two as determined according to Section 673(2) of the
Community Service Block Grant Act.
c) is working full–time and has a federal education
debt burden that is at least 20% of the borrower’s monthly
gross income. The borrower’s income minus the educational
debt burden must be less than 220% of the total monthly gross
amount associated with the minimum wage rate or earnings equal
to 100% of the poverty line for a family of two.
d) Has been granted an economic hardship deferment under
either the Federal Direct Loan Program or the Federal Perkins
Loan Program for the same period of time for which the FFEL
economic hardship deferment is requested.
Deferment Eligibility Chart
Education Related Deferment
Request
Economic Hardship Deferment
Request
Economic Hardship Deferment Worksheet
A
Economic Hardship Deferment Wooksheet
B
FORBEARANCE PROVISIONS
Forbearance is a temporary cessation or reduction of payments
while interest continues to accrue on your account. It is
mandatory under certain conditions and is excluded from the
period of repayment. To apply for a forbearance call your
lender/servicer to find out if they have a special form for
the forbearance process.
DISCRETIONARY FORBEARANCE
ADMINISTRATIVE FORBEARANCE
MANDATORY FORBEARANCE
-
Borrower serving in a medical or dental internship or
residency program.
-
If a borrower’s FFEL payments equal or exceed 20%
of his or her total monthly income.
-
Granted in twelve month increments.
-
Time limit of 36 months (except Internship/Residency).
-
Borrower receives a National Service Educational Award
under the National Community Service Trust Act of 1993.
-
Borrower performing service that qualifies for partial
repayment of loan under Department of Defense’s Student
Loan Repayment Program.
MANDATORY ADMINISTRATIVE FORBEARANCE
-
Exceptional circumstances exist such as a local or national
emergency or military mobilization.
-
Variable interest rate on standard or graduated repayment
schedule would result in loan not being repaid within
maximum repayment period.
-
Up to 5 years when an income–sensitive repayment
schedule causes the extension of the maximum repayment
terms.
-
Changes to FFELP regulations may provide for other conditions
for which forbearance may be granted. For additional information
check with your lender/servicer.
NO ADMINISTRATIVE OR OTHER FEE SHALL BE CHARGED FOR GRANTING
FORBEARANCE. ALSO‚ NO ADVERSE INFORMATION SHALL BE GIVEN
TO CREDIT BUREAUS BECAUSE OF THE FORBEARANCE.
| FFEL Program Forbearance Criteria |
| Optional Forbearance |
- Borrower (or endorser) is unable to make scheduled
loan payments due to poor health or other acceptable
reasons (2)
|
| Optional Administrative Forbearance
(3) |
- Borrower does not qualify for a deferment because:
- Borrower does not meet a deferment category;
or
- Loan is in default
- Borrower has died or become totally and permanently
disabled (4)
- Forbearance granted for a maximum of 60 days pending
documentation of borrower’s death or disability
- Pending discharge of borrower’s loan due to:
(4)
- Attendance at a closed school
- False certification of loan eligibility
- Borrower’s or endorser’s bankruptcy
- At time of sale or transfer of borrower’s loan‚
borrower is less than 60 days delinquent (4)
- Borrower’s payment of interest and principal
is overdue and:
- For a properly granted period of deferment
which the lender learns the borrower did not qualify;
- Upon the beginning of an authorized deferment
period;
- For the period beginning when the borrower
entered repayment until the first payment due
date was established;
- For a period authorized by ED in the event
of a national military mobilization or other national
emergency; or
- For a period prior to the borrower’s filing
for bankruptcy
|
| Mandatory Forbearance (4‚ 5) |
-
Borrower’s total Title IV debt burden equals
or exceeds 20% of a borrower’s total monthly
income (4)
-
Borrower serving in to a medical or dental internship
or residency
-
Borrower serving in to a national service position
for which he/she receives to a national service
educational award under the National Community Services
Trust Act of 1993
-
Borrower performing service that qualifies for
partial repayment of loan under Department of Defense’s
Student Loan Repayment Programs
|
| FFEL Program Forbearance Criteria |
-
Exceptional circumstances exist such as; local
or national emergency or military mobilization (5)
or geographical area designated a disaster area
-
Variable interest rate on standard or graduated
repayment schedule would result in loan not being
repaid within maximum repayment period.
-
Decreased installments under income–sensitive
repayment schedule would result in loan not being
repaid within maximum 10–year repayment period
|
(1) Borrower must be willing‚ but unable‚ to make
scheduled loan payments. (2) Borrower must request forbearance
in writing and provide documentation of his/her circumstances.
A written agreement between the lender and borrower is required.
(3) Forbearance is granted at the option of the lender based
upon documented circumstances‚ and automatically becomes
effective upon notification to borrower. No agreement is required.
Interest continues to accrue.
(4) Regulations implementing these forbearance provisions
become effective 07/01/95.
(5) Borrower must request forbearance in writing and document
that he/she qualified for the forbearance. Agreement of borrower
not required.
(6) Documentation of military mobilization required.
CANCELLATION PROVISION
If a borrower dies or becomes totally and permanently disabled‚
the guarantee agency will pay the borrower’s obligation
for principal and interest‚ and the holder of the loan
may not collect the loan from an endorser‚ or from the
borrower’s estate. A death certificate or certification
of permanent disability from a physician is required for loan
cancellation.
|
Direct Loan Program/FFEL Program Loan
Cancellation and Payment by ED
|
|
|
|
Eligibility Criteria
|
Comments
|
|
|
|
|
|
For cancellation of a Federal PLUS due to the dependent
student’s death‚ the student’s death
must have occurred on or after 07/23/92.
|
|
|
Borrower not considered totally and permanently disabled
if condition existed at time loan was applied for‚
unless that condition substantially deteriorated after
the loan was made.
|
|
|
Cancellation also applies if student withdrew within
90 days (or longer in exceptional circumstances) of
date of school’s closure. Cancellation does not
apply if student able to complete his/her program: á
through a teach–out arrangement at another school;
or á by transferring credits earned at closed school
to another eligible institution.
|
|
|
Loan eligibility considered falsely certified if school:
á admitted student under ability to benefit even though
student did not meet ability–to–benefit requirements
and student could not find employment in the occupation
for which training was provided; á signed borrower’s
authorization; á endorsed borrower’s loan check
or EFT authorization and borrower did not receive or
benefit from the loan proceeds; or á certified the eligibility
of a student who did not have the ability to benefit
from the training at the time of enrollment‚ because
of a physical or mental condition‚ age‚ criminal
record‚ or other reasons accepted by ED‚ and
would not meet the requirements for employment (in the
student’s state of residence when the loan was
certified) in the occupation for which the training
program supported by the loan was intended.
|
|
Payment by ED or Guaranty Agency
|
|
Eligibility Criteria
|
Comments
|
|
|
If loan is not ultimately discharged in bankruptcy‚
it again becomes the borrower’s obligation.
|
(1) If Direct Consolidation/Federal Consolidation Loan obtained
by co–makers of the loan must meet a cancellation provision.
If Direct Plus/Federal Plus Loan obtained with an endorser‚
the borrower and the endorser must meet a cancellation provision.
If a Federal PLUS Loan obtained by co–makers‚ bother
parents must meet a cancellation provision.
Total and Permanent Disability
Cancellation Request
|
