Deferment, Forbearance, and Forgiveness

Here's a some cool features that FFELP loans have that you won't find on a mortgage or car loan: Deferment, Grace, Forbearance, and Forgiveness. We'll discuss below, but each one allows for relief during a period of hardship when a loan cannot be repaid.

Deferment generally refers to the time after you take out a FFELP loan but before you graduate. Obviously as a student your income is at best minimal and your ability to repay loans taken out while in school to attend school is next to nil. The government recognizes this and allows you to postpone your loan payments until after you graduate. Keep in mind, the interest ticker continues to run during this period, you’re merely granted a reprieve from making payments.

Grace is typically a 6 month period from the time you graduate or separate from school. This is a busy time for new grads: new job, new city, need a new car, need a new wardrobe, etc., etc. And our benevolent government has sought to give new grads some breathing room. After all, those loans have helped make you a valuable member of our society, so let’s ensure your ready for the awesome responsibility of paying taxes (and more importantly – repaying your student loans). Of course, for all loan types other than unsubsidized, the interest ticker continues to run.

Forbearance is typically sprung during a period of economic hardship or you are enrolled in an AmeriCorps type program. You’ll need to apply in 12 month increments for this feature.

Forgiveness is just that: in some cases, some type of FFELP loans can be forgiven. There are well defined instances that outline this event. The most common forgiveness option is for teachers working in low-income schools. One important note here: check to make sure consolidating any loans does not eliminate the potential for loan forgiveness.

All these features are rights you have as a FFELP loan holder. Do not be shy about evoking these rights if the conditions warrant. And by all means, make sure you have all information possible when evaluating these features.