Occasionally, a lender will have a student's loan(s) in repayment status when the student is attending school. Sometimes, through misunderstanding or misrouted communication, the student inadvertently goes into default, which results in Texas Guaranteed (TG) purchasing the student's loan as a claim. When a student realizes that these circumstances have developed, he or she is usually very eager to rectify the situation and regain good standing with the lender. Thanks to recent changes to the in-school deferment regulations, lenders now have the ability to repurchase the student's loan, backdate the in-school deferment, and relieve the student from default status. Here is some history on the in-school deferment process.

Prior to the 1998 Reauthorization of the Higher Education Act of 1965, a borrower in repayment who was enrolled in school, and who wished to postpone repayment of his or her loan, had to request an in-school deferment from the lender, either verbally or in writing. It was the borrower's responsibility to request the deferment and provide the lender with the necessary documentation to support the deferment eligibility. Effective October 1, 1998, with Reauthorization, a borrower is no longer required to request an in-school deferment. A lender must now process an in-school deferment if:

The lender receives information from the borrower's school about the borrower's eligibility in connection with a new loan, or
The lender receives student status information from the borrower's school, either directly or indirectly, indicating that the borrower's enrollment status supports eligibility for a deferment.

Furthermore, until recently, a lender could only backdate an in-school deferment up to a maximum of six months prior to the date the lender received the request and documentation for the deferment. However, based on a final regulation issued on October 29, 1999, retroactive in-school deferments are no longer subject to this six-month limitation. A lender must now backdate a borrower's in-school deferment indefinitely, to the beginning date of a borrower's at least half-time enrollment. Even though the effective date of this regulation was July 1, 2000, it could have been implemented retroactively to October 1, 1998, if the lender wished to exercise a good faith effort to help students who may have inadvertently gone into default.

Therefore, since lenders now have the ability not only to grant an in-school deferment without the borrower's request, but also to backdate the deferment indefinitely, TG strongly encourages lenders who receive information that a defaulted borrower is/was eligible for an in-school deferment to repurchase the student's loan. Repurchasing a loan and putting the borrower back into an in-school or repayment status (depending on whether the student is still in school at the time of repurchase) is in the borrower's best interest and is another means of keeping default rates as low as possible.

Questions
For questions about in-school deferments or repurchasing a loan from TG, contact TG Customer Services at (800) 252-9743, ext. 4444, or send an message to customer.services@tgslc.org.