Author: David Wolowitz & Michael O'Connor, Prairie State Legal Services
Last updated: January 2008
What Is It? These programs allow the discharge or deferment of certain federally guaranteed loans which were made to enable the borrower to attend college.
What Is Its Purpose? To prevent financial hardship for borrowers with disabilities.
Who Can Benefit? Any person who is responsible for the repayment of certain federally guaranteed student loans and who has a disability or cares for a person with a disability.
The Federal Family Education Loan (FFEL) programs are federal programs which provide loans to low and moderate income students. The loans allow the students to attend college or other post-secondary training. This section explains certain rights of borrowers with disabilities or individuals who care for persons with disabilities. Specifically, this section explains their rights to seek to have the loan "discharged" or to have the payments "deferred."
The four loan programs under the FFEL program are:
•The Stafford Loan Program. Loans are made directly to students.
•The Supplemental Loan Program. Loans are made directly to students.
•The PLUS Loan Program. Loans are made to the parents of students.
•The Federal Consolidation Loan Program. Borrowers with multiple federal student loans consolidate those loans into a single loan.
Deferment of FFEL Loans
Some borrowers have a right to a "deferment" of the loan. The term "deferment" refers to permission given to a borrower to stop making loan payments on a temporary basis. Your rights in connection with deferment are different depending on whether you obtained your FFEL loan before or after July 1, 1993.
Deferment of FFEL Loans Obtained Before July 1, 1993
If you are a borrower who is responsible for the repayment of a FFEL loan which you obtained before July 1, 1993, you are entitled to have the payments deferred if:
To receive a deferment based on your own temporary disability, you must provide the lender with a written certification from your doctor that due to injury or illness you are unable to work for a period of at least 60 days. You are not eligible for a disability deferment on the basis of a condition that existed at the time you applied for the loan, unless that condition has become substantially worse.
To receive a deferment based on the disability of your spouse or other dependent, you must supply the lender with:
In the case of deferment due to the disability of a spouse or dependent, you must provide new written certifications to the lender every 6 months.
Deferment of FFEL Loans Obtained After July 1, 1993
For FFEL loans obtained after July 1, 1993, the law does not specifically provide for deferment due to a temporary disability. Instead, if you have a temporary disability, you are entitled to a deferment if repaying the loan would cause an "economic hardship."
You will qualify for a deferment on this basis if:
How Long Deferment Lasts
The deferment period can last for up to three years. For loans made after July 1, 1993, you must annually re-certify your eligibility for a deferment.
Effect of Deferment
For Stafford loans and for Consolidation loans (which were obtained to consolidate only Stafford loans), you do not have to pay either the principal or the interest payments during the deferment period.
For Supplemental Loans and PLUS Loans, during the deferment period you do not have to make any payments on the loan principal. However, you still must pay the interest, unless the lender agrees otherwise. If the lender agrees, you can stop making interest payments or can make smaller interest payments, but the lender is not legally required to do so. When the lender does suspend or reduce interest payments, this is called "forbearance."
Repayment Following Deferment or Forbearance
Any payments that are not made due to deferment or forbearance must be repaid later. This can be done by increasing the amount of the payments, or by extending the repayment period.
Discharge of FFEL Loans
A borrower is entitled to have any FFEL loan and any Perkins Student loan completely discharged if the borrower is "totally and permanently disabled." For the purpose of this law, the term "totally and permanently disabled" means that you are unable to work and earn money or attend school due to an injury or illness that is expected to continue indefinitely or result in death.
You are not eligible for a disability discharge on the basis of a condition that existed at the time you applied for the loan, unless that condition has substantially deteriorated.
To receive a discharge based on permanent disability, you must provide the lender with a written certification from your doctor. The lender is entitled to continue efforts to collect the loan until the doctor's certification is received.
How to Obtain a Discharge or Deferment
To obtain a discharge or deferment, you must contact the bank that is collecting your loan or the agency that is servicing your loan. The bank or servicing agency must supply you with the necessary forms needed for your request. You must complete the forms and submit them along with the required documentation.
The law does not create a specific framework for the handling of appeals. If the bank or servicing agency denies your request for a deferment or a discharge, you should ask them how you may obtain a reconsideration of the decision. The bank or agency should give you the opportunity to meet with them and to supply the documentation to support your request.
If the bank or servicing agency continues to refuse your request for a deferment or a discharge, you should contact the U.S. Department of Education, Student Loan Complaint Center and ask for their assistance in resolving the matter.
Statutes and Regulations
The federal statute concerning deferment is found at 20 USCA 1077(a)(2)(C)(viii).
The federal statute concerning loan discharge is found at 20 USCA 1087.
The regulations concerning loan deferment are at 34 C.F.R. 682.210(b)(iv).
The regulations concerning loan discharge are at 34 C.F.R. 682.402(c).
Information from U.S. Department of Education
You may contact the U.S. Department of Education, Student Loan Complaint Center at:
600 Independence Ave., S.W.
ROB-3, Room 3032
Washington, DC 20202
You may obtain forms by computer, by contacting the U.S. Dept. of Education student website.
If you are unsure which agency is servicing your student loan, or for other general information, call the Federal Student Aid Information Center at (800) 433-3243; (800) 730-8913 (TDD).
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