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Borrowers who are having trouble making payments on their federal loans due to financial difficulties should contact their loan servicer immediately to see if they are eligible for a deferment or forbearance.
Deferment
A deferment temporarily suspends payments for borrowers who meet eligibility requirements. When the deferment period ends, the student must either apply for a renewal or begin making loan payments.
Categories of eligibility for deferment are identified by federal regulation. They include, but are not limited to:
- Enrollment in an eligible program at least half time
- Unemployment
- Economic hardship
Forbearance
A borrower may apply for a forbearance to temporarily postpone or reduce federal student loan payments for an agreed-upon period of time. Terms are arranged on a case-by-case basis between the borrower and the loan servicer.
Default
If your scheduled payments become 270 days late, you are in violation of your federal student loan agreement. Your lender or servicer will assume that you do not intend to repay your loan, and the default will be reported to a national credit bureau. It will remain on your credit record for seven years and may affect your ability to obtain credit cards, car loans, or financing for other major purchases. Defaulting on your student loan may also have the following consequences:
- The entire unpaid balance of your loan, including interest, may become due and payable immediately.
- The federal government may garnish your wages and withhold your federal and state income tax refunds.
- You will not be eligible to receive any additional federal or state financial aid for students until you repay your loan.
- You may no longer be eligible for deferments and forbearance. Your loan may be referred to a collection agency.
Even filing for bankruptcy will not cancel your student loan debt in most cases. Consult your attorney before considering this as an option.
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