Your Questions About Direct Loan Servicing

Nagesh answers:

Log onto your lender/service’s website. Look for “Automatic Debit.” If these are Direct Loans, you should receive a .25% interest rate deduction for making this arrangement.

Nagesh answers:

Forbearance.It can last up to 12 months, during which time you’ll be off the hook for payments but will still accrue interest on your loan. In order to qualify, you must be facing financial hardship, for example, having expenses resulting from a serious illness.

Income-Based Repayment

There are plenty of reasons to take out federal loans in lieu of private student loans, but the Income-Based Repayment plan takes the cake. For most borrowers, IBR payments are capped at 15% of their income. Recently, President Obama signed an order to reduce IBR payments to 10% of income for borrowers who took out loans after October 2011.

The best part? If you are enrolled in IBR for 25 years, any remaining balance will be erased. Plus, public service workers can apply for loan forgiveness if they are enrolled in IBR.

How to apply: Find your loan servicer at www.nslds.ed.gov and apply.

If You’ve Already Missed Payments And Are In Default …

Loan Consolidation

If you have defaulted on your federal student loan (generally, missing payments for more than 90 days), you will probably already have been contacted by debt collectors. At that point, you might consider consolidating your debt. That means they’ll combine your balances and reissue your loan under a new repayment plan (be wary of fees, though). How to apply: Request a consolidation application from your debt collector or you may apply for a new direct consolidation loan with the U.S. Department of Education.

Loan Rehabilitation If you’re in default on your loan and consolidating doesn’t sound appealing, think about a rehabilitation plan. Your lender will set up a payment based on your financial situation. Once you pay consecutively for nine months, it’s like getting a clean slate. They scrub your defaulted status off your credit history, any wage or tax refund garnishments will end, and you may be eligible for deferment and forbearance again.

How to apply: Contact your debt collector and request this option. If they give you any grief and you still think you qualify for one of these options, ask to speak with their Special Assistance Unit. If that doesn’t work, file a complaint with the Federal Student Aid Ombudsman Group at the U.S. Department of Education.

Nagesh answers:

The loan can be cancelled in the event of death. From the Department of Education’s website:

“Disability, bankruptcy, or death.

* Your loan may be discharged if you are determined to be totally and permanently disabled and you meet certain requirements during a 3-year conditional discharge period. To apply for this discharge, you must provide a physician’s statement that you became totally and permanently disabled after the loan was made. See your copy of the Borrower’s Rights and Responsibilities Statement for more information on the procedures and conditions for this discharge.
* Your loan may be cancelled if it is discharged in bankruptcy. This is not an automatic process—you must prove to the bankruptcy court that repaying the loan would cause undue hardship.
* For a student who dies, the loan will be cancelled if a family member or other representative provides an original or a copy of the original or certified copy of the death certificate to the Direct Loan Servicing Center.

Call the Servicing Center (1-800-848-0979) for more information or to get a cancellation form. You can also find more information in your copy of the Borrower’s Rights and Responsibilities Statement or on the “Other Forms” page at the Servicing Center’s website.”

Nagesh answers:

If she has trouble making her education loan payments, contact immediately the organization that services your loan. You might qualify for a deferment, forbearance, or other form of payment relief. It’s important to take action before you are charged late fees. For Federal Perkins Loans, contact your loan servicer or the school that made you the loan. For FFEL Loans, contact the lender or agency that holds your loan. For Direct Loans, contact the Direct Loan Servicing Center at www.dl.ed.gov or by calling 1-800-848-0979 or 1-315-738-6634. TTY users should call 1-800-848-0983.

See the links for more detailed info!!
Good luck.

Nagesh answers:

This is one of those programs that looks really great on paper, but when you figure out how worthless it is, it seems a little strange they even mention it. First, you have to pay on the loan for 10 YEARS before you are eligible for forgiveness of the remaining balance… And since all federal loans are put on a 10 year payment plan (120 payments) your loan will be paid off the month you are eligible to get it forgiven. Pretty stupid uh? You get this to work to your advantage by taking a very low paying job and choosing a payment plan to reflect this… Of course, you may starve to death for 10 years and in the end have about 20 bucks forgiven because that is all you owe after paying on it for 10 years.

Anyway, for public service: “if you are employed in certain public service jobs and have made 120 payments on your Direct Loans (after Oct. 1, 2007), the remaining balance that you owe may be forgiven. Only payments made under certain repayment plans may be counted toward the required 120 payments. You must not be in default on the loans that are forgiven.”

For purposes of the Public Service Loan Forgiveness Program, the term “public service organization” means –
A federal, state, local, or Tribal government organization, agency, or entity (includes most public schools, colleges and universities);
A public child or family service agency;
A non-profit organization under section 501(c)(3) of the Internal Revenue Code that is exempt from taxation under section 501(a) of the Internal Revenue Code (includes most not-for-profit private schools, colleges, and universities);
A Tribal college or university; or
A private organization that is not a for-profit business, a labor union, a partisan political organization, or an organization engaged in religious activities (unless the qualifying activities are unrelated to religious instruction, worship services, or any form of proselytizing) and that provides the following public services –
Emergency management;
Military service;
Public safety;
Law enforcement;
Public interest law services;
Early childhood education (including licensed or regulated health care, Head Start, and state-funded pre-kindergarten);
Public service for individuals with disabilities and the elderly;
Public health (including nurses, nurse practioners, nurses in a clinical setting, and full-time professionals engaged in health care practioner occupations and health care support occupations);
Public education;
Public library services; and
School library or other school-based services.