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"The current economic downturn has increased the number of student loan borrowers who cannot afford their monthly loan payments," said Gregory A. Ayers, USA Funds senior vice president, policy and administration. "The Federal Family Education Loan Program, the largest federal student aid program, offers several provisions to help borrowers through these difficult economic times."
Payment relief options on federal student loans include the following:
Deferment enables borrowers who meet certain conditions to postpone loan repayment for a specified period of time. Student loan borrowers who are unemployed, facing certain economic hardships, serving in the military or returning to school should contact their lender or loan servicer for information about their deferment options. The federal government pays the interest that accumulates during deferment for borrowers with subsidized Stafford loans.
Forbearance can provide a temporary postponement or reduction of loan payments for borrowers who don't meet the standards for deferment but who still have difficulty making their monthly payments. Forbearance generally is granted at the discretion of the lender for periods of up to 12 months at a time. Interest will continue to add up during forbearance, unless the borrower makes arrangements to pay it.
Flexible repayment plans can assist borrowers who need a more-affordable monthly loan payment. Graduated repayment provides smaller initial payments that increase over the term of the loan. Income-sensitive repayment ties payments to the borrower's monthly income, although payments must cover at least the accruing interest. For borrowers with more than $30,000 in federal student loan debt, extended repayment can reduce monthly payments by spreading those payments over a period of up to 25 years. Borrowers should consult with their lender or loan servicer about these options.
"Federal student loan borrowers should not wait until their payments are overdue to contact their lender or loan servicer and request payment relief," Ayers said. "Delaying action will only add interest and late payment fees to a borrower's loan costs and could ultimately result in damaged credit and the costly consequences of loan default."
USA Funds offers additional information about loan payment relief options on its Web site at www.usafunds.org/borrowers. Borrowers experiencing payment problems on loans guaranteed by USA Funds can access their account information and take action to resolve their payment issues by visiting www.loanpaymentsolutions.org.
Headquartered in Indianapolis, USA Funds is a nonprofit corporation that works to enhance postsecondary education preparedness, access and success by providing and supporting financial and other valued services. During the year ending Sept. 30, 2008, USA Funds guaranteed Federal Stafford and PLUS loans totaling $17.2 billion for students and parents throughout the nation. USA Funds serves as the designated guarantor of federal education loans in eight states: Arizona, Hawaii and the Pacific Islands, Indiana, Kansas, Maryland, Mississippi, Nevada and Wyoming. For more information about USA Funds, visit www.usafunds.org.
SOURCE USA Funds
http://www.usafunds.org
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