Hey CBer's

I'm trying to help a friend out and am gathering information for him. He has loans w/ Sallie Mae for $50k total (30k principle, 20k deferred interest). He needed to drop school last semester for family reasons.....so 6 months after SM is expecting payments of $450/mo. He can't afford this, but does plan on going back to school when things settle down. What are his options with the lender? He's currently at 6.8% interest. So that works out to ~=3.5k a year in interest alone. If he gets back in school can he defer payments? What is forebarence? I pay my SL as needed, so I don't have too much info on this subject. I told him for right now, tell the lender that he can't pay $450/mo, and probably not the $300 in interest.....but to keep in contact with them. Any ideas on his future solutions/outcomes?

Thanks All,
SoCal

Based on the interest rate you mentioned and the 6 month grace period, I'm assuming these are federal loans. He'll need to request either a deferment or a forbearance. A deferment would be preferable as he won't be accruing interest on any subsidized loans. He'll need to qualify based on something like unemployment or economic hardship. He can also postpone payments by requesting a forbearance, which is easier to qualify for but he'll continue to accrue interest during his forbearance period. He can apply for a deferment or forbearance on Sallie Mae's website. The most important thing is that he stay on top of it. When he applies to postpone payments, he needs to follow up and make sure everything was processed correctly and he needs to make sure to remember when payments are due to begin again as deferments and forbearances do not automatically renew. Once he's back in school, as long as he's enrolled at least half-time, he should be eligible for an in-school deferment again.

You can use a deferment only for certain things, like being in school or certain training programs. You can find this information by going to Sallie Mae's "service your loan" section and reading about it. They list reasons you can get a deferment..(which is financially preferable, because the loan interest is usually paid by the federal government during deferment.) Usually the list for deferment does not include unemployment.

A forbearance is used when you don't have a job and/or have a job but can't make the payments. This is usually called a 'economic hardship' forbearance. Your loan payments are suspended, but interest is capitalized. And you can only do this so many years during the life of your loan. Check with Sallie Mae, because it is also possible to get a graduated payment plan, where you pay less at first and more later..which could allow you friend to keep up and move forward.

If he isn't into reading about it to figure out his options, make him call the Sallie Mae office. Default on a student loan can haunt you forever.

Sallie Mae's own website specifically lists unemployment and economic hardship as potential deferment qualifications.

Quoting from http://www.salliemae.com/after_graduation/...e/deferment.htm



Of course he'll have to apply for it and qualify, but please don't give the impression that he should just ask for a forbearance because there's no way he'll qualify for a deferment. That's just not correct.

My mistake.

My student loan with Sallie Mae did not allow deferment for unemployment, and I am sure of that, having been unemployed between undergrad and grad school and having had to figure out what to do.

Just check with SM! Sorry to cause confusion.

This is a tough one if the loan does not allow for deferment. The best idea would be re-enroll in school and re-evaluate the student loans. Once in school again your buddy can take advantage of the financial aid office at his or her college.