Economic Hardship

Dear Betsy,

I am receiving notice that I am due for payment on my student loans. I would like to prevent that, but I am not sure what form I need to request. I am currently working at a fast food chain, and I am not making that much money. I was also unemployed for about 3 months, but living with family members and not getting government assistance.

I am hoping that I can get my payments deferred for about 6 months before I start making regular payments, so I get back on my feet again. Please let me know if this is a possibility and what forms I will need to fill out to make this happen.

Thanks,
Marie

Dear Marie,

You might want to ask your lender or servicer (the company that manages your loans) about an Economic Hardship Deferment. If you meet certain criteria, you can postpone your payments for a specific amount of time. Call your servicer or visit them online for a complete listing of the available deferment options. The important thing to remember is that you have options available, but you must be proactive in letting your servicer know if you are in trouble.

There are also several repayment options available to student loan borrowers who find their monthly payments too high for their current budgets. The information you’ve given me suggests that the Income-Sensitive Repayment (ISR) option may be best for your situation. ISR allows you to choose a percentage of your monthly income to pay each month. You will need to contact your loan holder to change your repayment plan. They should be able to let you know if ISR—or another repayment schedule—is right for you.

If none of these other options are available to you, a last resort option would be to put your loan in forbearance. Like deferment, forbearance is a temporary suspension of payment. It works differently because the interest on all parts of your loan (subsidized or unsubsidized) will still accrue and will be capitalized at the end of the forbearance period. It is a good idea to try to pay the interest while your loan is in forbearance, so your loan principle does not increase by the end of the period.

Please do write again if you have other questions.

Regards,
Betsy