CHAPTER FOUR

DEFERMENT PROVISIONS FOR THE FEDERAL STAFFORD LOAN SUBSIDIZED/ UNSUBSIDIZED‚ AND FEDERAL SUPPLEMENTAL LOAN FOR STUDENTS.

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 Full–time study at an institution of higher education or a vocational school which is operated by an agency of the Federal Government.

• 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).

• Periods of unemployment totaling up to 2 years‚ if during those periods the borrower is seeking but unable to find full–time employment.

• Up to 2 years of service in an eligible internship or residency program. If the internship or residency program exceeds two years the lender must grant forbearance renewable in 12 month intervals for the period equal to the length of time remaining in the medical residency or internship program. This must be requested in writing by the borrower and no administrative or other fee shall be charged for granting forbearance.

• 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)

• 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 BORROWERS THAT PERFORM VOLUNTEER SERVICES FOR LOANS MADE BEFORE 07/01/93

In accordance with Public Law 101–610‚ the National and Community Service Act of 1990‚ the following are the terms and conditions under which students receiving a Federal Stafford may obtain a deferment for loan repayment for Volunteer Service.

The borrower may‚ upon making a properly documented written request to the lending institution‚ defer repayment for up to 3 years and interest will not accrue while the borrower is:

• A Peace Corp Volunteer

• A Vista volunteer under Title I – Part A of the Domestic Service Act of 1973.

• A full–time volunteer in service for a tax–exempt organization that the Department of Education has determined is comparable to Peace Corp or Vista Service.

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.

• At least half–time student at an eligible post–secondary school.

• Study in an eligible graduate fellowship program or in a rehabilitation training program for the disabled.

• Seeking and unable to find full–time employment – up to 3 years.

• Economic hardship – up to 3 years.

1. 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.

FEDERAL FAMILY EDUCATION LOAN PROGRAM DEFERMENT PROVISIONS

1. Deferment approval for a new borrower enrolled in a graduate or postgraduate‚ fellowship–supported program (that is‚ a Fulbright Fellowship) will extend for the duration of the fellowship period.

   7. Public Law 102–26 authorized‚ for the period of April 9‚ 1991 to September 30‚ 1997‚ special Federal Stafford Loan deferment and grace period provisions for reservists called up for active duty service in connection with Operation Desert Shield and Operation Desert Storm. These benefits are:

   · A military deferment for the duration of service in connection with Operation Desert Shield or Operation Desert Storm‚ even if the length of the deferment exceeds the maximum deferment authorized in section 428(b)(1)(M)(ii) or 427(a)(2)(C)(ii);

   · A six–month post–deferment grace period following an Operation Desert Shield or Operation Desert Storm military deferment; and

   · A one–time six month post–deferment grace period following an in–school deferment for a borrower who received a military deferment and who later becomes eligible for an in–school deferment.

   8. Period of service in an eligible internship program (See 34CFR Section 682.210(g)); or serving in an internship or resident program leading to a degree or certificate awarded by an institution of higher education‚ a hospital‚ or a health–care facility that offers postgraduate training. Lenders are now required to grant forbearance to medical interns and residents who have expended their two–year residency deferments before they have completed their intern and residency requirements.

   9. A mother who
   · has a pre–school–age child‚
   · is entering or reentering the work force full time‚ and
   · is being paid no more than $1 above the minimum wage.
   

   10. A borrower who is seeking‚ but who is unable to find‚ full–time employment.

   11. A borrower is considered to have an economic hardship if the borrower
   · is receiving payment under a federal or state public assistance program;
   · is working full time but earning an amount that does not exceed the greater of
   

   _ the 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; or

   · meets other regulatory criteria which take into account the borrower’s debt–to–income ratio as a primary factor. Specifically‚ the borrower may qualify if:

   _ He or she is working full time and has a federal educational debt burden (including defaulted loans) that is at least 20% of the borrower’s total monthly gross income. The borrower income‚ minus the education debt burden‚ must be less than 220% of the total monthly gross amount associated with minimum wage rate work or earning equal to 100% of the poverty line for a family of two.

   _ he or she is not working full time and has a total monthly gross income that does not exceed twice the minimum wage or the poverty line for a family of two‚ and‚ after deducting the borrower’s monthly education loan payments‚ the remaining amount of the borrower’s income does not exceed those amounts.

   · has been granted an economic hardship deferment under either Federal Direct Loans or the Federal Perkins Loan Program for the same period of time for which the FFEL economic hardship deferment is requested.

   12. Period for which the borrower is pregnant‚ caring for his or her newborn child‚ or caring for his or her adopted child (immediately following adoption). The borrower may neither be attending school nor be gainfully employed and must have been enrolled at least half time at a participating school at some time during the six months preceding the period of parental leave.

   13. A Federal PLUS loan borrower whose loan was first made and disbursed prior to July 1‚ 1993 qualified for a deferment when a dependent student for whom the parents borrowed a Federal PLUS Loan is still dependent and meets one of the following conditions:

   · The student is attending an eligible school full time.

   · The student is attending full time at an institution of higher education or a vocational school that is operated by an agency of the federal government.

   · The student is enrolled in an eligible graduate fellowship program or in an approved rehabilitation training program for the disabled.

   · The student is attending an eligible school half time‚ and he or she meets all of the following conditions:

   _ The student has an outstanding balance on a Federal Stafford Loan or Federal SLS loan borrowed on or after July 1‚ 1987 but before July 1‚ 1993.

   _ On the date the student signed the promissory note for that loan‚ he or she had no outstanding balance on another FFEL borrowed before July 1‚ 1987.

   _ The student obtains a Federal Stafford Loan or Federal Direct Loan for the same enrollment period for which the parent is applying for a deferment.

Education Related Deferment Request

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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

• Granted at the lender’s discretion for temporary financial difficulty such as poor health or unanticipated personal problems.

• Granted for periods of time not to exceed 12 months.

ADMINISTRATIVE FORBEARANCE

• Administrative forbearance does not require the agreement of the borrower‚ and may be granted only under specified conditions when payment of interest and principal is overdue. It automatically becomes effective upon notification to the borrower. Interest continues to accrue.

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.

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.

1 Borrower must be willing‚ but unable‚ to make scheduled loan payments.

4 Regulations implementing these forbearance provisions become effective 07/01/95.

(1) Borrower must be willing‚ but unable‚ to make scheduled loan payments.

(4) Regulations implementing these forbearance provisions become effective 07/01/95.

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.

(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

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