Understanding Deferment and Forbearance

How to win the financial aid game


Paying your educational loans on time is critical to your personal financial health. Timely payments help you establish a good credit history that can benefit you for years to come. Before you experience difficulty making your payments, contact your lender. College Loan Corporation and other lenders will work with you to find ways to avoid defaulting on your student loans.

During entrance counseling, you were advised of certain rights and responsibilities as a student loan borrower. It’s your responsibility to repay your loans as agreed, and it’s your right to obtain a deferment if you meet the eligibility requirements.

Some Solutions

Financial hardship can happen to anyone. Job loss, medical problems or unexpected bills can make it difficult to repay your student loans. If you are hit with financial hardship, the first step is to call your lender. In addition to certain borrower benefits to which you may be entitled, you may be eligible for deferment, forbearance or consolidation.

Deferment

If you are attending school at least half time or have a financial need that meets the Department of Education criteria, and cannot afford to make your monthly payments, your lender is required to postpone repayment of your loans. This is one of your rights as a student borrower.

Student loans obtained from federal loan programs, such as Stafford and PLUS Loans, are eligible for deferments.

Deferments also can be granted in several less frequent circumstances for working mothers, parental leave, dependent disability and temporary total disability, and for certain internships and residencies, depending on the dates when you took out your loans.

Forbearance

If you need a temporary reprieve from making payments or need a lower payment amount, and do not qualify for deferment, your lender may offer you forbearance. In forbearance, you may be required to make monthly interest payments, or the interest may be added to your principal balance once the forbearance period expires.

Generally, each lender determines the criteria for granting forbearance, but there are circumstances under which the law requires a lender to offer forbearance.

Your monthly debt-to-income ratio and other special circumstances monthly debt-to-income ratio and other special circumstances may be considered. Contact your lender for details.

It’s your responsibility to continue making payments on all of your student loans until you receive notification that the requested deferment or forbearance has been granted. Once you have been approved for a deferment or forbearance, it’s your responsibility to immediately inform your lender of any change in your circumstances that might affect your deferment eligibility.

There are four types of forbearance that are available to borrowers and, in some cases, endorsers:

  • Administrative forbearance
  • Discretionary forbearance
  • Mandatory administrative forbearance
  • Mandatory forbearance

It is important that you contact your lender as terms and conditions vary by type of forbearance.


ABOUT THE AUTHOR

This article was written by College Loan Corporation

College Loan Corporation (CLC®), headquartered in San Diego, is the nation's seventh largest student loan provider, owning and managing more than $8 billion in student loan assets. CLC has helped more than 500,000 students and families pay for college. More than 800 colleges and universities have designated CLC as a preferred lender. CLC makes higher education possible through innovative loan products and industry-leading, first-class customer service. CLC also offers the nation's best student loan advice line, answered by expert Loan Consultants 24 Hours a Day, 7 Days a Week.

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