STUDENT LOANS - PAYING BACK YOUR STUDENT LOAN AND DELINQUENCY
© 2000 by Neighborhood Legal Services, Inc.
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When do I have to start paying back my student loan?

        You usually have between 6 and 9 months after you leave school to start repaying your student loans. Ask your lender for a repayment plan. You may choose from a variety of payment plans. Repayment periods range from 10 to 25 years. Remember, the longer the length of your repayment plan, the lower your monthly payments, but the more you will be paying over time.

What if I haven't been paying on my student loans?

        If you haven't been paying your student loans, you are either delinquent or in default. (For more on default, ask for the legal information letter on Student Loans and Defaults.)

        If you have missed less than 6 bills, you are considered delinquent. There are several consequences of being delinquent. Your credit report will show that you have been late in your payments, or that you have not paid at all. Also, when you are delinquent, you are at risk of being in default which has very serious consequences.

What if I am delinquent, is there anything that I can do?

        Yes. If you are delinquent or are having trouble paying your student loans, you should contact your lender and explain your current situation.

        If you cannot afford to start repayment, there are two different ways that you can avoid making payments for the present time: deferral or forbearance.

What is deferral?

        A deferral is a temporary way to delay making payments as a result of a specific situation. During a deferment, interest will not accrue, and you will not owe any additional money.

Who qualifies for a deferral?

        It depends on when you received your student loan. If the date was July 1, 1993 or later, you can defer payment if you are:

• a full-time student, or
• in a graduate program, or
• in a rehabilitative training program, or
• unemployed (3 year limit), or
• experiencing economic hardship, or
• temporarily totally disabled.

    If you received your loans before July 1993, you can also get a deferment for:

• engaging in certain public service activities (like service in the Armed Forces, Peace Corp Volunteers, or as a teacher in shortage areas),
• being temporarily disabled, or
• returning to the workforce after having a newborn

        In order to get a deferral, you must apply within 8 months of your inability to pay. (If you are, or have been in default, you may still get a deferral by following the steps to rehabilitate your loan. For more information on this, ask for the informational letter on Student Loans and Default.)

What is a forbearance?

        A forbearance is a temporary suspension of or reduction in your student loan payments. It is not as advantageous as a deferment because interest continues to accrue even when you are in a forbearance.

        If you are having a hard time making your payments, you can ask your lender for:

• up to 12 months forbearance during which you do not have to make any payments, or
• an extension on your due dates, or
• a rearrangement of your payment schedule, or reduction in the amount due each month

Who qualifies for a forbearance?

        Forbearance is often granted if you are in poor health, or are experiencing personal economic hardship.

        You usually qualify for an economic hardship forbearance when the amount of your student loan payment equals 20% of your income. (Even if you are in default, you may still be eligible for a forbearance by following the steps to rehabilitate your loan. For more information on this, ask for the informational letter on Student Loans and Default.)

        You must request the forbearance yourself whenever you are having a hard time paying your bills. If your request is not granted, try to make an alternate payment plan with lower amounts that you can afford, or call Project Dandelion at 847-0650 for assistance.

Can my loan ever be canceled?

        A loan may only be discharged, or canceled:

• upon your death, or
• if you become totally and permanently disabled (note that if your condition existed at the time you applied fort the loan, your debt will not be discharged for this reason), or
• if a school closure stopped you from finishing school, or
• if you received false certification, or
• if the school failed to make an owed refund to you.

        A loan may be partially or fully canceled, or your payments may be deferred if you are a teacher in an impoverished area, serving in the military, a staff member at a Head Start Program, or a volunteer with the Peace Corps.

I have several loans, can I just make one payment on all of them?

        Yes, but only if you consolidate your loans. Consolidation combines some or all of your loans into one, with one new interest rate (not more than 8.25%). If you have not consolidated your loans, you may have to mail several different payments out each month, but each loan is kept separate, with a separate interest rate, and payment schedule.

        Consolidation usually leads to lower monthly payments and a longer repayment period of up to 30 years, but can cost more in the long run.

        Consolidation is the process of combining some, or all, of your student loans into one loan with one interest rate and one monthly payment. First, you have to contact a consolidating lender, such as Federal Direct Consolidation Loan Program at 1-800-557-7392 and make a payment plan. After you have done this, you also have to contact the Consolidation Unit at New York State Higher Education Services Corporation (NYSHESC) to request a consolidation. Contact them at 1-800-666-0991. Note that consolidation charges fees and/or costs.

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