POSTPONING OR REDUCING PAYMENTS

If you’re facing a large amount of debt, you might be tempted to skip or postpone some of your student loan payments. Instead, you should immediately contact your loan servicer (or in the case of Federal Perkins and MIT Technology Loans, your MIT loan counselor) to discuss other repayment plan options, and to find out whether you’re eligible for a deferment or a forbearance. They’ll work with you to help you avoid the serious consequences of delinquency and default. However, remember that you must apply for and receive permission from your loan servicer to get a deferment or other alternative arrangement.

Important things to remember

• If you’re in default on your loan, you are not eligible for deferment or forbearance.
• Deferments and forbearances vary among loan programs.
• You must file deferment and/or forbearance forms separately for each loan holder. Forms must be filed on time or you’ll be charged late fees.
• You must continue to make payments on the loan until you’re notified that the deferment, forbearance or cancellation is approved.
• Provisions for deferments and other alternative repayment arrangements are subject to change, so keep in touch with your loan servicer(s).

Changing repayment plans

If your loan is on a standard or graduated repayment plan, you may be able to switch to a different plan such extended repayment, income-contingent repayment or income-based repayment. More information can be found on the SFS Get a Loan page, or at FinAid.org (federal loans only).

Deferment

A deferment lets you temporarily stop making payments on your loan. You may qualify for a deferment if you meet any of these criteria:

• You're enrolled at least half-time at an eligible school
• You're studying full-time in a graduate fellowship program, or in any approved full-time internship or rehabilitation training program
• You're unemployed or experiencing financial hardship
• You're serving in the Peace Corps or in the U.S. military (including the National Guard) on full-time active duty during wartime or national emergency,

• You're temporarily totally disabled

For details on the qualifications for a deferment, see the financial aid guide published by the U.S. Department of Education.

Deferments are granted for a limited amount of time. You are not responsible for paying the interest on subsidized loans during a period of deferment. However, you are responsible for paying the interest on your unsubsidized loans during deferment. If you are in default on your loan, you are not eligible for a deferment.

Forbearance

If you can’t make your scheduled loan payments but don’t qualify for a deferment, you may be eligible for a forbearance. A forbearance lets you stop making payments or make smaller payments on your loan for a specified period, or extend the time for making payments. Interest is charged on both subsidized and unsubsidized loans during forbearance. You may qualify for a forbearance due to illness, financial hardship, or service in a medical or dental internship or residency. If you are in default on your loan, you are not eligible for a forbearance.

Cancellation or discharge

A cancellation (also known as discharge) releases you from all obligations to repay your loan. You may qualify for cancellation of all or part of your loan if you die or are totally and permanently disabled.

Loan forgiveness for public service

Borrowers who work in public service professions – including in the military, law enforcement, firefighting, nursing, public defender, library or public education fields – can have any balance on their Federal Direct Loan or Federal Direct Consolidation Loan or graduate PLUS Loan forgiven after 120 monthly loan repayments and 10 years of full-time employment in the profession.

• Loans being repaid through standard repayment, income-contingent repayment and income-based repayment (available starting July 2009) plans are eligible. Payments made through graduated or extended repayment plans do not count toward forgiveness.
• The program begins July 1, 2008. The soonest that payments can begin to count toward the 10 years is October 1, 2007.

Not everyone in public service jobs will have a loan balance remaining after 10 years; borrowers with low debts or with higher incomes for the entire 10 years will not ultimately benefit. For more information and a list of applicable professions, see FinAid.org or the Q&A by the Project on Student Debt.

Rehabilitation

If you have defaulted on a loan, all is not lost. After making 12 consecutive on-time monthly payments in amounts agreed to by your lender, you may be granted rehabilitation. This means your loan will be returned to regular repayment status, the default will be removed from your credit history and you will again be eligible to borrow education loan funds. Contact your MIT loan counselor or loan servicer for details.