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Handling Default

 

Handling Default


Frequently Asked Questions About Student Loan Default

Here are some frequently asked questions with answers you may have been looking for.


I cannot pay my loan. What do I do now?

Contact your lender, servicer, or TG and explain that you cannot pay and why. We may be able to provide you with several repayment options and help you through your financial rough spot.

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What is TG and how does its role differ from that of my servicer?

TG is a nonprofit organization — a guarantor — that has an agreement with the Department of Education to administer the Federal Family Education Loan Program (FFELP). TG is a guarantor of your FFELP student loan(s). One of TG's primary responsibilities is to provide information to help borrowers understand about their FFELP loans and their obligation to successfully repay those loans. However, if you fail to make payments and you are at least 270 days delinquent, you are considered in default and your lender may file a default claim with TG for repayment of your loan. TG is then obligated to pay your lender the outstanding balance of interest and principal you owe, provided your lender meets certain requirements under federal guidelines. Your servicer works with and for your lender to bill, collect, and provide you with information pertinent to your loan. If TG pays a default claim on your loan, TG becomes responsible for collecting your loan on behalf of the federal government.

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What does default mean?

If you fail to meet the terms of your loan and make your scheduled payments, your loan will eventually go into default. After you are 270 days delinquent, your lender can file a claim with the guarantor of your student loan(s). This means that the guarantor will pay the money you owe to your lender. The guarantor will then be responsible for collecting your loan on behalf of the federal government through a variety of options.

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What does claim pending mean?

Claim pending means the guarantor has not yet paid the lender's claim, and it might be possible for you to avoid the consequences of default. However, you must act immediately; once your lender files a claim, there are only a few days before the guarantor will pay the claim.

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What is a deferment? What deferments are available?

A deferment allows you to postpone the payment of your loan. You are entitled to defer your student loan payments when certain eligibility criteria are met and you request a deferment. There are nine deferment forms available covering many difficult financial situations. To apply or get further information about deferments, contact your lender, servicer, or TG. You can also access and download the correct deferment forms from TG Online.

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What is forbearance?

Forbearance is a period of time during which a lender permits a borrower to temporarily postpone making payments or make reduced payments. Forbearance is usually granted at the discretion of the lender. You are responsible for the interest that accrues; and, if unpaid, the interest may be capitalized. Forbearance is often used to bring delinquent loans current in situations where there is a legitimate financial hardship, and you do not qualify for a deferment.

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What is interest capitalization?

Capitalization occurs when a lender adds the unpaid accrued interest on a loan to your outstanding principal balance, increasing the total amount owed (or the balance). Interest is then accrued on your new total principal balance.

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I sent my deferment/forbearance/payment, but my lender or servicer did not receive it. What should I do? Will my loan default?

If your lender did not receive your deferment or forbearance form, contact a lender representative as soon as possible. Request a copy of the appropriate form by fax and fax the completed form back to the lender. You can also download the deferment forms from TG Online. If your lender did not receive a payment, contact the lender as soon as possible. Tell the representative the amount of payment, when you mailed it, and the check or money order number. If the payment was a check, ask your bank if and when it cleared. If it did clear, provide this information to the lender along with a copy of the front and back of the check if possible. You might be asked to do the same with a money order. Write legibly on all correspondence and keep copies. Your lender can file a claim with the guarantor if the deferment, forbearance, or payment is not received and your loan(s) becomes at least 270 days delinquent.

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I am in school. Why am I being billed? How can I be delinquent? What can I do?

If you are in school and being billed for your student loan(s), you probably transferred schools, dropped below half-time status, or are attending school beyond your anticipated graduation date. You should contact your lender and provide proof of your in-school status whenever your circumstances change. If you fail to do so, your lender will expect you to begin making payments when your grace period ends.

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My dependent student for whom I took out a loan is still in school. Why am I being billed? How can I be delinquent? What can I do?

If you took out a parent PLUS loan for your dependent student who is still enrolled in school and you are getting billed for the loan(s), be sure your lender receives your request to defer payments until six months after your student is no longer enrolled at least half time. If your student has transferred schools, or is attending school beyond his or her anticipated graduation date, contact your lender and provide proof of your student's at least half-time enrollment status. If your student has dropped below half-time enrollment, contact your lender for other options.

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You keep calling my relatives! Why?

When you signed your promissory note, you provided the names, addresses, and phone numbers of relatives and friends in the event your loan holder, servicer, or TG are unable to contact you, they can leave a message for you and obtain your new address and phone number.

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Who handles reports to credit agencies?

Federal regulations require your lender to report your loan and repayment information to all credit agencies. If TG pays a default claim, federal regulations also require TG to report the default to all national credit agencies.

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I have just filed for bankruptcy and I would rather collectors speak with my attorney. What should I do?

Provide your attorney's name and telephone number to the collectors when they contact you. The case number, city filed in, date filed, and chapter are also helpful. The more information you can provide, the faster the collection attempts will stop.

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Where are my loans?

Call TG Default Prevention: (800) 338-4752 or you can access your TG account at myTG.

We can track the loans that TG has guaranteed. Your financial aid office can help track loans with other guarantors and the Department of Education. You can also get a complete listing of your loans from the National Student Loan Data System (NSLDS).

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Questions about default prevention? We have the answers.

TG
Monday - Thursday, 8 a.m. - 7 p.m., Friday, 8 a.m. - 5 p.m.
P.O. Box 83100
Round Rock, TX 78683-3100
Phone: (800) 338-4752
Fax: (512) 336-6566
Email: tgcares@tgslc.org

Please share your questions and comments regarding default prevention. You are important to us. With your help, we can succeed together.



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