Your Questions About Direct Loan Servicing

Nagesh answers:

First of all, I’m going to assume that you’re asking about federal student loans (Staffords and Perkins). Private student loans do not generally offer the option of a deferment.

For federal loans, a deferment is a matter of right, while a forbearance is an accommodation from your lender. If you qualify for a deferment, your lender will allow a temporary postponement in your payments. A forbearance must be applied for, and the lender has the choice of deciding whether or not to grant you the accommodation that you request.

To qualify for a deferment, you must meet one of several pre-determined conditions – one of these is an inability to find full-time employment. If you’re still employed full-time, the other option is to qualify for a deferment on the basis of economic hardship, but to do so will require that you meet certain income standards, based on your household size. Deferments are granted one year at a time, and can be renewed twice, for a total of 3 years during the repayment period.

If you want to apply for a deferment (which allows your lender to determine if you qualify), you’ll need to either contact the Direct Loan Servicing Center (if you borrowed directly from the Department of Education), or your lender (if you borrowed from a private lender like Sallie Mae). The number for the Direct Loan is 1-800-848-0979. The number for your lender can be found on the bills they’ve been sending you, or you can find it on their website.

As I explained earlier, a forbearance is for those borrowers who don’t qualify for a deferment. You’ll need to ask your lender – very nicely – if they’ll grant you that accommodation. There is such a thing as a mandatory forbearance – that happens in situations where you have a medical disability or if your loan payments exceed 20% of your monthly income. You’ll have to provide documentation of your financial circumstances, and again, your lender can choose to grant forbearance for a year at a time, and up to a total of 3 years. Here’s an example of what a forbearance application looks like: http://www.nelnet.net/forms/pdfs/forb.pdf

Remember – neither a deferment nor a forbearance is automatic – you have to contact the lender and apply for one. If it’s a Perkins, contact your school directly. If it’s a Direct Loan, contact the Direct Loan Servicing Center at the number I provided above. If it’s a FFEL loan, contact the lender – Sallie Mae, or Chase, or whoever provided your loan.

One more thing – if your loans are subsidized, interest won’t accrue during a deferment, but will during a forbearance. With unsubsidized loans, interest always accrues, whether you seek a deferment or a forbearance.

I hope that information helps you – good luck!

Nagesh answers:

From the PC website, which is easy enough to find:
“Deferment and Cancellation of Student Loans
Volunteers with Perkins loans may be eligible for a partial cancellation benefit. School loan deferments exist for several federal programs (i.e., Stafford, Perkins, direct, and consolidated loans). Some commercial loans may also be deferred during Peace Corps service. Because the rules that authorize deferment are complicated and subject to change, it is best to talk to your lending institution about how this benefit applies to your particular situation.”

Then, there’s this: http://www.peacecorps.gov/learn/whyvol/finben/instructions/ which also popped up in a quick search of the Peace Corps site. That’s the best place to look, after all.

It does not appear that any of your loans would be canceled through PC service. Perkins looks to be the only type of loan that has a portion canceled after at least a year of PC service.

Nagesh answers:

It is totally legal for a lender to make a profit on a loan….BUT, it is illegal when a loan is sold to another company & that company changes the terms of the loan, if the loan had a fixed rate.

You need to get your old loan paperwork. Please tell me you have not tossed that out! Was your original loan at a fixed rate?? If it was not, well then, it is what it is.

There was another person here yesterday complaining about the same thing. You need to see if you can get this loan taken over by a more reputable lender. I have never heard of Mohela!

Go to your bank or maybe go with a perent to their bank & see if the lender will buy out your school loan & pay off Mohela to go away!!

Nagesh answers:

***Updated with new information on the listed lenders***

Redrose:

Federal loans and private loans are not eligible to be consolidated in the same loan package.

The best place to consolidate your federal loans is through the US Department of Education’s own loan consolidation program. You can find the Federal Direct Consolidation Loan Information Center here: http://www.loanconsolidation.ed.gov/

The government will not consolidate your private loans – so you’ll need another lender for that option. Unfortunately, the private loan consolidation marketplace is very limited right now – just like the market for private educational loans themselves.

I can’t provide you with a list of even the few remaining lenders that will consolidate private loans right now, but you should check with, in alphabetical, but no other order:

Bank of North Dakota (may not be accepting apps)
Collegiate Funding Services (Chase – accepting apps)
Collegiate Risk Management (accepting apps)
EduCare Financial (accepting apps)
Educational Loan Company (not accepting applications)
Georgia Student Finance Commission (may not accept app)
Navy Federal Credit Union (apparently fed only)
NextStudent (not currently accepting applications)
StudentLoans.com (not currently accepting applications)
Student Loan Financial Group (accepting applications)
US Bank (not currently accepting applications)
VFI (Vista Financial) (unclear if they’re accepting apps)
Wachovia Education Finance (seems to be fed only)
Wells Fargo Educational Financial Services (not accepting)

American Collegiate Financial (gone)
American Student Loan Services (fed only)
Anchor Bank (not accepting apps)
One Simple Loan (may not be making consol. Loans)
Royal Credit Union (not accepting apps)

Many of those companies may no longer be making student loans of any kind.

Good luck.

Nagesh answers:

Http://studentaid.ed.gov/PORTALSWebApp/students/english/PSF.jsp

http://studentaid.ed.gov/students/attachments/siteresources/LoanForgivenessv4.pdf