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Extensions on Paying Back Student Loans: Forbearances

In last week's blog we discussed ways to get extensions on paying off student loans, one way being deferments. This week we will discuss another solution to extending payments: forbearance. Forbearance, just like a deferment allows a borrower to temporally postpone payments on student loans and/or reduce the amount one pays monthly on those loans.

Forbearance is a solution to look into if you do not qualify for a deferment. With Direct Loans and Federal Family Education Loan (FFEL) forbearance can be requested and qualified for over the phone, where a deferment requires a borrower to send in an application to qualify. Forbearance with a FFEL requires a written notice to the borrower from the loan holder within 30 days of the request, confirming the forbearance. Forbearance may allow for up to a year without making payments or reduce payments on loans; however, interest still accrues on loans throughout the duration of forbearance.

There are two types of forbearances: discretionary and mandatory. Regulations on FFEL make a distinction between the two, but the Direct Loan Program does not. To qualify for a discretionary forbearance it has to be prior to filing for bankruptcy, because if a request for forbearance is placed after bankruptcy a borrower is technically defaulting on their forbearance. However, this does not mean that forbearance is not possible after filing for bankruptcy; it is just more complicated to be granted. A discretionary forbearance is permitted if the guaranty agency is able to determine if a borrower is eligible for discharge of the loan because of an unpaid refund, they attended a closed school, or if applicable the endorser of the loan went bankrupt. A forbearance is granted also during the period after reliable information is received indicating a borrower (or student, in the case of a Direct PLUS loan) has died or become permanently disabled, therefore the parent who took out the loan would be granted forbearance. Forbearance for poor health or other personal problems, under Stafford Loans have no maximum time, but on a Perkins Loan there is a maximum of three years the discretionary forbearance is active.

A mandatory forbearance requires the borrower to request directly from the loan holder and provide documents to qualify. To qualify for a mandatory forbearance on a FFEL, a borrower must not be able to pay off the loan within 10 years of taking it out. Mandatory forbearance is granted if monthly payments on student loans are more than 20% of total monthly income; however, documentation of income and other necessary information is required. Mandatory forbearance also applies if you are a teacher who is performing teaching services that would qualify you for teacher loan forgiveness. Also borrowers who are on active military duty qualify for forbearance, and those who have a medical or dental internship, or in a residency program. Exceptional circumstances that apply to this type of forbearance include: a national emergency or if national area is declared a disaster area by government.

Student loan debt is a very serious issue in today's economy with thousands of borrowers facing debt, and potentially bankruptcy. Knowing that there are temporary solutions to paying off debt, can give a borrower time to get back on their feet financially, thus being able to make regular monthly payments on their loans. If you should find yourself over your head in debt, and not sure how to handle your financial situation, look for an attorney who is experienced in dealing with debt from student loans.

Works Cited

Cohen, Joshua R.I. Student Loan Law Workshop. Law Office of Joshua R.I. Cohen, LLC, 20 Apr. 2013.

National Consumer Law Center, Student Loan Law (4th ed. 2010).

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