Forebearance

[Sas]

My husband and I are trying to buy a home. Our credit is not the greatest. My husband has around $12,000 in student loans from Sallie Mae. They have been in forebearance for 51 months. According to the bank, in order to, not count them in our DTI ratio they have to be in forebearance for 12 months from now.

 

Sallie Mae said that they cannot put them in forebearance for a year because they only have 9 months available. Is this standard or can they extend it?

 

Please help.

[LynnInMN]

Have they been in deferment or forebearance?? Forebearance is by definition is used after deferments have run out ...and they are usually granted for economic reasons...or medical residency periods and are usually granted for a temporary period of time...not a definate period like you have listed of 60 months.

[Sas]

My husband has not been in college since 1999 but I think he kept having them put in forebearance due to financial reasons. The supervisor at Sallie Mae said we can place them in deferment if my husband starts back to school as a part-time student.

 

His 1-year forebearance was due to end September 23, 2005 but like I said we need a year for a home loan. They said we cannot have anymore forebearances because they have been in for 51 months and they can only go 60 months.

 

Thanks for the help.

[LynnInMN]

You do realise that the interest has been accruing during forebearance. Only during deferment does the governtment pay the interest for you. So your loan balance is now probably over $14000.

[Sas]

Can you get a deferment if you are not in college?

[LynnInMN]

Can you get a deferment if you are not in college?

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Yes. That is why I asked whether he was in deferment or forebearance.

 

 

The following is from the DOE site

 

 

Deferments

 

A deferment means there are no payments required on your student loan during an approved period. For subsidized Stafford Loans, there is no interest that accrues during a deferment period. There is no pre-payment penalty, however, at any time. For Federal Stafford/Direct Loans made after July 1, 1993, there are three types of deferments:

 

In-school Deferment - As long as the student borrower is enrolled at least half-time (as defined by the school, normally six units for undergraduates and 4 units for graduate students), no interest accrues and no payments are required until after a six-month grace period after the student ceases to be enrolled at least half-time. An in-school deferment form completed by your school's registrar staff may be required to verify your enrollment unless your school is a participant in the National Clearinghouse where enrollment data is electronically transmitted to this agency who then notifies lenders, loan servicers, and guaranty agencies.

 

Unemployed Deferment - Student borrowers may be eligible for an unemployment deferment for up to three years after leaving school. A special deferment form will be required each year.

 

Economic Hardship Deferment - If the student borrower is not eligible for one of the above two deferments, he or she may be eligible for this deferment. A borrower can not have earnings beyond the low standard of living as determined by the Bureau of Labor Statistics (BLS).

 

Deferment provisions are different for Stafford Loans borrowed before July 1, 1993. Contact your lender or loan servicer for more information about deferment and forbearance provisions. Sallie Mae and EDFUND offer excellent resources about student and parent loans.

 

 

 

 

Forbearance

 

A forbearance is another excellent way to manage your student loan. A forbearance permits a student borrower a temporary period of time in which he or she may not make any payments on his or her loan, pay interest only, or make a payment for less than the normal repayment amount. A forbearance must be requested from your lender or loan servicer and a forbearance form must normally be completed.

 

While it is not guaranteed, most lenders or loan servicers will try to accommodate your request so you don't go into default or have a delinquent loan repayment. The only bad thing about a forbearance is that, unlike a deferment where the government pays the interest for you, interest continues to accumulate. So if you can't make interest payments, you will end up paying "interest-on-interest."

 

With the deferment and forbearance options listed above along with the more flexible loan repayment options, there is no reason why a student borrower should fall into delinquency or default on his or her student loan. Student borrowers are strongly encouraged to maintain an organized file of all student loan records and documents and to regularly stay in contact with his or her lender or loan servicer to protect their credit rating.

 

Contact your lender or loan servicer for the correct deferment or forbearance forms. These forms can also be downloaded from a variety of Web sites, including the Department of Education, Sallie Mae, or EDFUND. You will need Adobe's free Acrobat Reader.

 

Federal student loan borrowers are normally automatically granted an in-school deferment if they remain at the same school though may be required to complete a deferment form if they switch schools. In most cases, schools now verify a student's enrollment with the Department of Education (National Student Loan Database System - NSLDS).

 

Check with your lender or loan servicer on a regular basis to determine your loan status so that you are not placed in a delinquent or default status, which will seriously impact your future credit rating.

 

With the variety of deferment and forbearance provisions available, there is no reason for any borrower to default on his or her student loan.

[Sas]

Thanks for your help.