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Creating Consistency in Educational Finance: A Training Curriculum
Module 1: Customer Service Representatives
Regulatory requirements for deferments
- Identifying borrower categories
- Education-related deferments
- Public service deferments
- Family hardship deferments
Policy makers and regulatory agencies recognize that people tend to experience financial ups and downs, but that most of the low points are temporary in nature and usually improve over time.
When people are experiencing a hardship, necessities such as housing, food, and transportation are usually placed ahead of intangibles such as educational debt. Consequently, some borrowers may stop making payments on their student loan and the loan becomes delinquent. The following is a description of the deferment options available to borrowers who meet certain criteria. Deferments are entitlements; if a borrower qualifies, the lender must grant the deferment. If a borrower can continue to make payments, but in a reduced amount, that action should be encouraged. The payments can then be applied to principal on subsidized loans and to accruing interest on unsubsidized loans.
Identifying borrower categories
In order to determine the deferment options for individual borrowers, it is important to first identify the loan type and the borrower category as determined by the date that the borrower's first loan was disbursed and whether there was an outstanding balance on the previous loan when the borrower takes out a new loan. Since the inception of the Higher Education Act of 1965, there have been three primary changes to the deferment options available to borrowers. Loan disbursement dates determine which rules apply to which specific loans.
The borrower category, as shown in Table 2, in conjunction with the loan type, are used to determine the borrower's eligibility for a deferment.
The new Military Deferment resulting from the Higher Education Reconciliation Act of 2005 is not shown in Table 2. Unlike previous deferment types, the new Military Deferment applies to specific loans and is not borrower-based.
Education-related deferments
The In-school Deferment generally allows a student borrower to postpone repayment during periods of full-time and half-time study at an eligible school. The student borrower is eligible for an in-school deferment provided he or she meets the following qualifications:
- The borrower is enrolled at an eligible school as a full-time student (for all borrower categories and loan types).
- The borrower is enrolled at an eligible school as at least a half-time student (for new borrowers of all loan types).
Also, it is important to note that effective October 1, 1998, a borrower is eligible for a deferment based on at least half-time enrollment without being required to receive another loan to take out a new loan for that enrollment period.
PLUS loans may be deferred based on the enrollment status of a dependent student for PLUS borrowers whose first loan was disbursed from July 1, 1987, to June 30, 1993.
When determining a borrower's eligibility for an in-school deferment, the following factors must be taken into account:
- A borrower must be enrolled on at least a half-time basis. Full-time or half-time enrollment status is determined by the individual school.
- A borrower may be enrolled in an undergraduate, graduate, or a doctorate program.
- Simultaneous enrollment at more than one school may constitute half-time or full-time enrollment, provided that a single school certifies enrollment for all of the schools.
- Enrollment in a correspondence school program alone is considered half-time enrollment.
- An eligible school is one that participates in any Title IV Program, that is operated by a federal agency (such as a service academy), or has received a determination from the Department of Education that it qualifies as an eligible school.
- A borrower who is not a national of the United States is not eligible for an in-school deferment based on attendance at a foreign school located outside the United States.
The Graduate Fellowship Deferment allows a borrower to postpone repayment if the borrower is participating in a fellowship program. This deferment is available to all borrowers. A borrower is eligible for the graduate fellowship deferment if the borrower is participating in a fellowship program that:
- provides sufficient financial support to allow for full-time study for a period of at least six months;
- requires, prior to the awarding of funds, a written statement from each applicant explaining the applicant's objective;
- requires a graduate fellow to submit periodic reports, projects, or other evidence of progress;
- accepts the course of study at a foreign university for completion of the fellowship program;
- requires the borrower to hold at least a bachelor's degree; and
- requires the borrower to have been recommended by an institution of higher education into the program on a full-time basis.
The Rehabilitation Training Program Deferment allows a borrower to postpone repayment while he or she is participating in a rehabilitation program. This deferment is available for all borrowers. PLUS loans may be deferred based on the eligibility of a dependent student if the PLUS loan was disbursed on or before June 30, 1993. Borrowers must meet the following qualifications:
- The borrower is receiving, or is scheduled to receive, rehabilitation services.
- The rehabilitation training program is licensed, approved, certified, or otherwise recognized as providing rehabilitation training to qualified individuals by a state agency responsible for vocational rehabilitation, drug abuse treatment, mental health services, or alcohol abuse treatment programs. When applicable, the program may also be licensed, approved, certified, or otherwise recognized by the Department of Veterans Affairs.
- The rehabilitation program provides the borrower with rehabilitation services under a written plan. The written plan is individualized to meet the borrower's needs and includes a specified end date for the services that the borrower is expected to receive.
- The plan is structured in such a way to require a substantial commitment by the borrower for his/her rehabilitation. A substantial commitment is defined as demanding time and effort that would normally prevent an individual from engaging in full-time employment, either because of the number of hours that must be devoted to rehabilitation or because of the nature of the rehabilitation. Full-time employment is defined as at least 30 hours of work per week in a position that is expected to last at least three months.
The Internship/Residency Deferment allows a borrower to postpone repayment if the borrower is in an Internship/Residency program. This deferment is available to Stafford or SLS loan borrowers whose first loan was disbursed on or before June 30, 1993. PLUS loans may be deferred if the loan was disbursed before August 15, 1983. Borrowers qualify for this deferment if:
- They are serving in a medical internship/residency program that leads to a degree or certificate awarded by an institution of higher education, hospital, or a health care facility that offers postgraduate training.
- They are serving in an internship/residency program that is required of the borrower to receive professional recognition in order to begin professional practice or service.
- They are serving in a supervised program that requires the borrower to hold at least a bachelor's degree before acceptance into the program.
- The institution provides a statement that the borrower has been accepted into the program.
- For a medical internship program, the borrower provides a statement from the certifying official of the program that is received with the effective start date and completion date for the program. In addition, the above referenced statement must include that the borrower's participation is a requirement for receiving a degree or certificate from an institution of higher education, a hospital, or a health care facility that offers postgraduate training.
- For a non-medical internship program, the borrower provides certification from both the authorized program official and the appropriate licensing agency which includes a statement that completion of the program is required before the borrower can begin professional practice or service.
The Teacher Shortage Deferment allows a borrower to postpone repayment while teaching in a shortage area. This deferment is available to borrowers whose first Stafford or SLS loan was disbursed from July 1, 1987, to June 30, 1993. The maximum length of this deferment is 36 months provided the borrower meets one of the following qualifications:
- The borrower is teaching full-time in a public or nonprofit private elementary or secondary school in a geographic region or specific grade level, academic, instructional, subject matter or discipline classification that has been designated as a shortage area defined by the Department of Education (as recommended by the chief state school officer of the state) .
- If the borrower received a teacher shortage deferment for the previous school year, the borrower may reapply for a continuation of the deferment even if the teaching area is no longer classified as a shortage area.
Public service deferments
The Armed Forces Deferment allows a borrower to postpone repayment while serving on active duty in the armed forces. This deferment is available to Stafford or SLS borrowers whose first loan was disbursed on or before June 30, 1993. A PLUS loan borrower whose first loan was disbursed before August 15, 1983, qualifies for this deferment. The maximum length of this deferment is 36 months. This is a combined limit with the Public Health service and National Oceanic and Atmospheric Administration (NOAA) deferments. For example if a borrower used 26 months of NOAA deferment, the borrower will have 10 months of deferment remaining for the armed forces or public health deferment or a combination of the two. A borrower is eligible for the armed forces deferment if he or she
- Is on active duty in the Armed Forces of the United States. This includes the Army, Navy, Air Force, Marine Corps, and Coast Guard; or
- Is a member of the National Guard or Reserves and is serving in a full-time, active duty status for a minimum of one year; or
- Is serving as a full-time officer in the Commissioned Corps of the Public Health Service.
The Public Health Deferment allows a borrower to postpone repayment while serving as a full-time officer in the Commissioned Corps of the Public Health Service. This deferment is available to Stafford or SLS borrowers whose first loan was disbursed on or before June 30, 1993. Also, a PLUS loan borrower whose first loan was disbursed before August 15, 1983 qualifies for this deferment. The maximum length of time for this deferment is 36 months. This is a combined limit with the armed forces and NOAA deferments. A borrower is eligible for the public health deferment if he or she:
- Is on active duty in the Armed Forces of the United States. This includes the Army, Navy, Air Force, Marine Corps, and Coast Guard; or
- Is a member of the National Guard or Reserves and is serving in a full-time, active duty status, for a minimum of one year; or
- Is serving as a full-time officer in the Commissioned Corps of the Public Health Service.
The National Oceanic and Atmospheric Administration Deferment allows a borrower to postpone repayment while on active duty in the National Oceanic and Atmospheric Administration. It is available to Stafford or SLS loan borrowers whose first loan was disbursed from July 1, 1987 to June 30, 1993. The NOAA deferment is limited to 36 months and the time is calculated in conjunction with the armed forces and public health service deferments. The borrower qualifies for this deferment if he or she
- Serves on active duty in the National Oceanic and Atmospheric Administration; and
- Provides documentation of the period of service.
The Peace Corp Deferment allows a borrower to postpone repayment while serving in the Peace Corps. This deferment is available to Stafford or SLS borrowers whose first loan was disbursed on or before June 30, 1993. Also, PLUS loan borrowers whose first loan was disbursed before August 15, 1983, qualify for this deferment. The maximum length of this deferment is 36 months. A borrower qualifies for this deferment if he or she:
- Serves as a full-time volunteer in the Peace Corps for a period of at least one year. The length of the deferment is based on the length of service.
Stafford or SLS borrowers whose first loan was disbursed on or after July 1, 1993, are not eligible for the Peace Corps deferment; however, they may request an Economic Hardship deferment under the Peace Corps qualifier.
The Action Programs Deferment allows a borrower to postpone repayment while serving as a volunteer in an ACTION (VISTA/Americorp) Program. This deferment is available to Stafford or SLS borrowers whose first loan was disbursed on or before June 30, 1993. Also, PLUS borrowers whose first loan was disbursed before August 15, 1983, qualify for this deferment. The maximum length of the deferment is 36 months. A borrower qualifies if he or she;
- is a volunteer serving in a full-time, paid position in a program comparable to the ACTION/VISTA programs, or in the Americorp program, for at least one year.
The Tax Exempt Organization Deferment allows a borrower to postpone repayment while serving as a volunteer with a tax-exempt organization. This deferment is available to Stafford or SLS borrowers whose first loan was disbursed on or before June 30, 1993. Also, PLUS borrowers whose first loan was disbursed before August 15, 1983, qualify for this deferment. The maximum length of eligibility for this deferment is 36 months. A borrower is eligible for this deferment if he or she:
- Serves as a full-time volunteer for an organization that has been classified as tax exempt under Section 501(c) (3) of the Internal Revenue Code of 1986.
- The organization itself assists low-income people, and their communities, to eliminate poverty and poverty-related human, social, and environmental conditions.
- May not earn more than the federal minimum wage. However, the borrower may receive fringe benefits like those received by other employees of the organization.
Note that the borrower is ineligible for the tax exempt deferment if he or she provides religious instruction, conducts worship services, engages in religious fund-raising in support of religious activities, or proselytizes in any way. Proselytization includes, but is not limited to, attempting to recruit or convert (especially to a new faith, institution, or cause) an individual in exchange for food and/or shelter.
The Military Deferment allows a borrower to postpone repayment on certain loans while the borrower is serving on active duty during a war or other military operation or national emergency, or while performing qualifying National Guard duty during a war or other military operation or national emergency. This deferment is available only for a borrower's Federal Stafford and PLUS loans first disbursed on or after July 1, 2001, and Federal Consolidation loans disbursed on or after July 1, 2001, when all Title IV loans included were first disbursed on or after July 1, 2001. The maximum length of this deferment is three years. A borrower is eligible for the military deferment if he or she is serving:
- On active duty during a war or other military operation, or national emergency; or
- On qualifying National Guard duty during a war or other military operation, or national emergency.
Family hardship deferments
The Unemployment Deferment allows a borrower to postpone repayment when the borrower is unemployed and seeking employment. This deferment is available to Stafford or SLS borrowers whose first loan was disbursed on or before June 30, 1993. Also, PLUS borrowers whose first loan was disbursed on or before June 30, 1993, qualify for this deferment. The aforementioned borrowers are eligible for up to 24 months of deferment if the first loan was disbursed on or before June 30, 1993. If the first loan was disbursed on or after July 1, 1993, the borrower is eligible for up to 36 months. To qualify for deferment, the borrower must be:
- Unemployed or underemployed (working less than 30 hours per week for a period of 3 months or more); and
- Seeking a full time position in the United States in any field and
- Currently registered with a state or local public or private employment agency (unless there is not one within 50 miles of the borrower's current address); or
- Currently receiving unemployment benefits.
The Parental Leave Deferment allows a borrower to postpone repayment if the borrower is pregnant, caring for a newborn child, or caring for a newly adopted child. The deferment is available to Stafford or SLS borrowers whose first loan was disbursed on or before June 30, 1993. The deferment is available for up to six months per occurrence. Additionally, the borrower may not work full-time or attend school during the deferment period. The borrower must have been enrolled in school, on an at least half-time basis, within the six (6) months preceding the effective date of the deferment request.
The Working Mother Deferment allows female borrowers to postpone repayment when re-entering the workforce. Stafford or SLS borrowers whose first loan was disbursed from July 1, 1987, to June 30, 1993, are eligible for up to 12 months of deferment provided they meet the following criteria:
- They have entered or re-entered the work force within the year preceding the effective date of the deferment request.
- They are working full-time (at least 30 hours per week).
- They are not earning more than $1.00 per hour above the Federal Minimum Wage.
- They are the mother of a child who has not yet enrolled in elementary school for first grade or higher.
The Economic Hardship Deferment allows a borrower to postpone repayment when the borrower is experiencing economic hardship. The deferment is available to Stafford, SLS and PLUS borrowers whose first loan was disbursed on or after July 1, 1993 and is limited to a maximum of 36 months. To qualify for the Economic Hardship Deferment, the borrower must meet one of the qualifying conditions. These conditions include:
- receiving federal and/or state public assistance (e.g., food stamps, welfare, SSI, WIC, AFDC, LEAP, TANF, etc.)
- working full time with a gross monthly income (GMI) that is not more than the larger of the Federal Minimum Wage or the Poverty Line for a family of two for the state they reside in, whichever is larger
- not working full time with a GMI that is not more than two times the Federal Minimum Wage or two times the poverty line. In addition, the total remaining balance, after deducting the total cumulative amount of monthly student loan payment from the GMI, is not more than the Federal Minimum Wage or the Poverty Line for a family of two for the state they reside in
- working full time with an amount of monthly payments on all outstanding student loans equal to, or more than, 20 percent of the borrower's monthly-adjusted gross income. In addition, after deducting the total amount of monthly FFELP loan payments from the monthly adjusted gross income, the amount remaining must be less than 220 percent of the larger of the Federal Minimum Wage or the Poverty Line for a family of two for the state they reside in. When calculating if the borrower's total FFELP payment is equal to or greater than 20 percent of the borrower's GMI, all outstanding federal student loans are to be considered
- has been granted an Economic Hardship Deferment on an outstanding Perkins or Federal Direct Student Loan for the period of time the borrower is requesting deferment for his or her FFELP loans
- Active-duty Peace Corps volunteer
The Temporary Total Disability Deferment allows a borrower to postpone repayment due to disability. This deferment is available to Stafford or SLS borrowers whose first loan was disbursed on or before June 30, 1993. PLUS borrowers whose first loan was disbursed on or before June 30, 1993 qualify for up to 36 months of temporary disability deferment if
- The borrower is under the care of a physician (who must either be a doctor of medicine or osteopathy and legally authorized to practice) and unable to work or attend school for a minimum of 60 days in order to recover from an injury or illness, or
- The borrower is caring for a dependent or a spouse who is temporarily totally disabled for a period of at least 90 days.
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