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TRINITY DEBT MANAGEMENT LOAN COUNSELING
Events like losing a job, getting sick and having financial trouble can create many challenges. In such situations, making on-time student loan payments may not be a priority.
Before missing any payments, though, know that under certain circumstances you can temporarily suspend your payments with deferment and forbearance. Find out about the important differences between these postponement options and find the option right for you.
Deferment and forbearance are both preferable to missing loan payments. But, because forbearance increases the amount you owe, try to first qualify for a deferment.
Also, before postponing repayment, see if it makes sense for you to lower your payments with a different repayment schedule. This can save you money and preserve your deferment and forbearance eligibility for situations when you really need it. There are limits to how much deferment and forbearance time you can use.
Under certain circumstances, borrowers may receive a deferment or forbearance that temporarily postpones or reduces student loan payments. Postponing or reducing payments may help a borrower avoid defaulting on a student loan. Borrowers must work with their loan servicer to apply for deferment or forbearance.
Deferment is a period during which repayment of the principal and interest of a student loan is temporarily delayed. During deferment, loans will continue to accrue interest. The borrower is responsible for paying the interest that accrues during deferment, but payments are not due during the deferment period. This means that any interest accrued during deferment will be added to the principal balance of the loan, and the amount of the student loan payment after deferment will be higher.
Deferment options for federal loans vary depending on the type of loan and date the loan was incurred. You can get the following deferments for most loans:
There are several other deferments available in the Perkins program only.
You can request a deferment form from your loan servicer. Selected forms are also available here and on the Department of Education web site. You should contact your guaranty agency or school if you have a different type of loan. You should continue paying while your application is pending.
You can also qualify based on your income if you are working full-time, or your monthly income does not exceed the larger of the federal minimum wage rate, or 150% of the poverty line income for your family size and state. (In 2018, the poverty line for a family of two living in the 48 contiguous states was $16, 460). Borrowers should use this form when applying for an economic hardship deferment.
Most deferments do not happen automatically, and borrowers will likely need to submit a request to the loan servicer. For in-school deferments (enrolled at least half-time), many schools will submit enrollment status to the National Student Loan Clearinghouse, which in turn notifies loan servicers of a borrower’s enrollment status. However, it is the borrower’s responsibility to ensure that deferments are properly posted, and the borrower should contact the school’s financial aid office, as well as the loan servicer.
If a borrower is unable to make scheduled loan payments and is not eligible for a deferment, the loan servicer may grant a forbearance. Forbearance is a period in which payments will be postponed or reduced for up to 12 months. During forbearance, loans will continue to accrue interest. The borrower is responsible for paying the interest that accrues during forbearance, but payments are not due during the forbearance period. This means that any interest accrued during forbearance will be added to the principal balance of the loan, and the amount of the student loan payment after forbearance will be higher.There are two types of forbearances:
The forbearance can be requested for:
Receiving loan forbearance does not happen automatically, and borrowers will need to submit a request to the loan servicer. In some cases, a borrower must submit supporting documentation to apply for forbearance.
Borrowers that have made 120 payments on Direct Loans (after Oct. 1, 2007) while employed full-time in certain public service jobs may be eligible to have the remaining balance owed forgiven. Only payments made under certain repayment plans may be counted toward the required 120 payments. Borrowers must not be in default on the loans that are forgiven.
A not-for-profit organization that is not exempt under section 501(c) (3) of the Internal Revenue Code must provide one of the following public services:
Even though the 10-year Standard Repayment Plan is also a qualifying repayment plan for PSLF, you cannot receive PSLF unless you enter an income-driven repayment plan. Here’s why: If you are in repayment on the 10-year Standard Repayment Plan during the entire time you are working toward PSLF, you will have no remaining balance left to forgive after you have made 120 qualifying PSLF payments. Therefore, if you are seeking PSLF and are not already repaying under an income-driven repayment plan, you should change to an income-driven repayment plan as soon as possible.
Be sure to consider whether an income-driven repayment plan is right for you before deciding to repay your federal student loans using those plans.
It’s important to understand that the Standard Repayment Plan for Direct Consolidation Loans is not the same repayment plan as the 10-Year Standard Repayment Plan, and payments made under the Standard Repayment Plan for Direct Consolidation Loans do not usually qualify for PSLF purposes.
Whether we’re helping people pay off their unsecured debt or offering assistance to those behind in their mortgage payments, Trinity has the knowledge and resources to make a difference. Our intention is to help people become debt-free, and most importantly, remain debt-free for keeps!
Trinity Debt Management is not a lender and does not lend money.
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