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Deferring Student Loan Payments

Deferring Student Loan Payments

Getting an Economic Hardship Forbearance

Those who have received federally-guaranteed student loans but are having trouble repaying the loans for economic reasons may be able to receive an economic hardship forbearance.

Forbearance allows the borrower to delay or reduce loan payments. In most cases, the borrower has to request forbearance in writing, along with appropriate supporting material that explains the reason for the request. The institution that made the loan will determine if the borrower is eligible for forbearance. If the borrower is not eligible for forbearance, or does not get in touch with the lender in a timely fashion, the loan may be subject to default.

The borrower can alert the student loan program about this situation by filling out a form that is available from the borrower’s school financial aid office. (A borrower will be able to get these forms even though he or she has graduated.) The U.S. Department of Education also has the forms.

Once the borrower’s forbearance has been established, the borrower may be able to secure a federal student loan consolidation that will permit monthly payments to be lowered. If the borrower has received forbearance, he or she must still pay any interest that accumulated during the forbearance period. The amount of the unpaid interest will be added to the borrower’s balance at the end of the forbearance period.

Cancellation of a Stafford Loan

The borrower may qualify for total or partial loan forgiveness under certain circumstances.

Such circumstances include:

Closure of the school within 90 days of the borrower’s enrollment, so that the borrower was not able to finish the program of study.

The borrower’s signature was forged.

The borrower becomes totally and permanently disabled or dies.

Additionally, if the borrower becomes a teacher in a designated low-income area, some or all of the federally-guaranteed loans may be canceled. More information on this is available from the Department of Education.

However, the government will not forgive the loan just because the borrower maintains that he or she received poor training at the school, that the members of the faculty were unqualified to teach, or that the school had inadequate equipment. The failure of the school to provide promised job placement is also an invalid reason for asking that the loan be forgiven.