Managing Your Loan Payments

It's easier than you might think.  What's more, it will save you considerable angst and eliminate serious negative consequences.

Fast Facts To Help Manage Your Loan Payments

• On-time repayment of your student loan is critically important.  It's also a great way to develop a good credit history, which follows you wherever you go and whatever you do.
• Delinquent payments are reported to a national credit agency and will damage your credit report and your future ability to borrow.
• Your lender or guarantor can provide you with options if you're having difficulty making payments.
• The consequences of defaulting on your student loan can be downright scary:
  • You lose the privilege of monthly payments, and the full amount of your loan becomes immediately due and payable.
  • Your wages and/or your entire tax refund may be garnished.
  • Collection charges and attorney fees may be assessed, increasing the loan payoff amount.
  • You will lose your eligibility for any additional federal student financial aid.
  • Your payments may increase, further straining your ability to repay.
  • You will lose the options of deferment and forbearance.
  • You may not be eligible for certain federal and state jobs.
  • You may lose your professional license.

Deferment

• A deferment is the temporary postponement of payments on your student loan
• Your lender or guarantor can advise you on your deferment eligibility status.
• Primary reasons and time considerations for deferment include:
  • Returning to school at least half time (unlimited periods)
  • Unemployment (six-month period with a maximum of six periods)
  • Economic hardship (12-month period with a maximum of three periods)
• Deferments are not automatic; you must apply for one and receive approval from your lender.
• When subsidized loans are deferred, the principal payments are postponed and the interest is billed to the federal government.
• When unsubsidized loan is deferred, the principal payments are postponed but you are responsible for paying the accrued interest.
• If you received a student loan prior to July 1, 1993, additional factors may constitute eligibility for deferment - a graduate fellowship, military duty, parental leave, and more.  Talk to your lender for details.

Forbearance

• Forbearance is the temporary cessation or reduction of principal payments on your student loan.
• You are still responsible for all accrued interest during the forbearance period.
• If you do not qualify for a deferment but are having a hard time repaying your student loan, you may be eligible for forbearance.
• Common reasons for forbearance include:
  • Poor health
  • A rigorous residency program
  • A loan payment that exceeds 20 percent of your total monthly gross income
• Forbearance is allowed at the discretion of the lender.
• Forbearance often results in an extended repayment period.

Loan Cancellation

• A loan may be cancelled under extreme circumstances:
  • Permanent and total disability
  • inability to complete a course of study because your school closes (if certain conditions prevail)
  • Eligibility falsely certified by your school
  • Death