Maintained for Historical Purposes

This resource is being maintained for historical purposes only and is not currently applicable.

Federal Perkins Loan Program - Forbearance and Deferment

AwardYear: 1997-1998
EnterChapterNo: 6
EnterChapterTitle: Federal Perkins Loan Program
SectionNumber: 4
SectionTitle: Forbearance and Deferment
PageNumbers: 37-50


FORBEARANCE

[[Definition of forbearance]]
[[Forbearance--34 CFR 674.33(d)]]
If a borrower is willing but financially unable to make the required
payments on a loan, he or she may request that the school grant
forbearance. Forbearance is a temporary postponement of payments,
an extension of time allowed for making payments, or the acceptance
of smaller payments than were previously scheduled. Interest will
continue to accrue during any period of forbearance. The borrower
must request forbearance in writing, providing documentation that
supports the borrower's claim that he or she is financially unable to
make payments. Forbearance is available for all Perkins Loans and
National Direct Student Loans (NDSLs), regardless of when they
were made.

When the school receives the borrower's written request and
supporting documentation, the school must grant the borrower
forbearance for a period of up to one year at a time. The forbearance
may be renewed, but the periods of forbearance collectively may not
exceed a total of three years. A school may apply an authorized
period of forbearance to begin retroactively (that is, to begin on an
earlier date than the date of the borrower's request) if the borrower
requests that the school do so and if he or she provides adequate
documentation to support the request.

Both loan principal and any interest that accrues must be included in
the forbearance unless the borrower chooses to pay interest that
accrues. The borrower and the school must agree in writing on the
terms of forbearance. The forbearance must be in the form of a
temporary cessation of payments unless the borrower chooses one of
the alternative types of forbearance (as explained in the first
paragraph above).

[[Criteria for granting forbearance]]
[[Evidence the borrower must submit]]
A school must grant forbearance if the total amount the borrower is
obligated to pay monthly on all Student Financial Assistance (SFA)
loans is equal to or greater than 20% of the borrower's total monthly
gross income (defined on the next page). If the borrower's loan
payments are due less frequently than monthly, a proportional share
of the payments is used to determine the equivalent in total monthly
payments. For example, if a payment is due quarterly, divide the
amount by three (because the payment covers three months) to
determine the equivalent monthly payment amount. The school must
require the borrower to submit at least the following documentation:

- evidence of the amount of the most recent total monthly gross
income the borrower received and

- evidence of the amount of the monthly payments the borrower
owes for the most recent month on his or her SFA loans.

[[Definition of "total monthly gross income"]]
Total monthly gross income is the gross amount of income received
by the borrower from employment (either full time or part time) and
from other sources.

[[Other reasons for granting forbearance]]
A school also must grant forbearance if it determines the borrower
should qualify due to poor health or other acceptable reasons or if the
U.S. Department of Education authorizes a period of forbearance due
to a national military mobilization or other national emergency. The
Department strongly encourages a school to grant forbearance to a
borrower who is serving in Americorps.

DEFERMENT

[[Definition of deferment]]
A borrower is entitled to have the repayment of a loan deferred under
certain circumstances. A deferment is a period of time during which
the borrower is not required to repay the loan principal. Interest will
not accrue during any type of deferment except a hardship
deferment. For loans made on or after July 1, 1993, INTEREST
DOES NOT ACCRUE during any type of deferment.

[[Deferment and cancellation]]
If a borrower is teaching or engaged in other services that qualify
him or her for both deferment and cancellation, the loan deferment is
considered to run concurrently with any period for which loan
cancellation is granted.

[[Applying for a deferment]]
A borrower must apply for a deferment in writing by using a
deferment form obtained from the business or student loan office of
the school that made the loan (or from the school's billing service, if
it uses one). The form must be submitted to the school along with
whatever documentation the school requires. The school establishes
a deadline for submitting the form and documentation. (The
Department does NOT approve or supply deferment forms.) The
borrower must file a form at least once a year for as long as the
deferment can be claimed. The borrower must immediately report
any change in deferment status to the lending institution.

IN-SCHOOL DEFERMENT--COMMON TO ALL PROGRAM
LOANS

[[Required enrollment status]]
A borrower may defer repayment of a Perkins Loan, NDSL, or
National Defense Student Loan (Defense Loan) if he or she is
enrolled at least half time in an eligible institution. Interest will not
accrue during the deferment. To receive a deferment based on at
least half-time enrollment, also called an in-school deferment, the
student must be enrolled as a regular student in an eligible institution
of higher education or a comparable institution outside the United
States approved by the Department for deferment purposes.
However, it is not a requirement that the school participate in the
Federal Perkins Loan Program. If a borrower is attending a school
that ceases to qualify as an institution of higher education, the
borrower's deferment ends on the date the school ceases to qualify.

A regular student is one who is enrolled for the purpose of obtaining
a degree or certificate. If the borrower is attending at least half time
as a regular student for a full academic year and intends to do so in
the next academic year, he or she is entitled to a deferment for 12
months.

DEFERMENT OF LOANS MADE ON OR AFTER JULY 1, 1993

For Perkins Loans and NDSLs made on or after July 1, 1993, a
borrower may defer loan repayment, and interest does not accrue
while he or she

[[In-school deferment]]
- is enrolled at least half time as a regular student at an eligible
institution and is attending classes at that school as described
above;*1*

- is enrolled and in attendance as a regular student in a course of
study that is part of a graduate fellowship program approved by
the Department;*2*

- is engaged in graduate or post-graduate fellowship-supported
study (such as a Fulbright grant) outside the United States;

[[Rehabilitation training]]
- is enrolled in a course of study that is part of an Department-
approved rehabilitation training program for disabled individuals;

[[Unemployment]]
- is seeking and is unable to find full-time employment;*3*

[[Economic hardship]]
- is suffering an economic hardship*3* (discussed below); or

- is engaged in certain types of service that qualify the borrower for
cancellation of the loan.*4*

[[Post-deferment grace period]]
A Perkins Loan or NDSL borrower is entitled to a 6-month grace
period after each type of deferment (a "post-deferment" grace
period). Neither the deferment nor the grace period is counted as part
of the borrower's 10-year repayment period.

[[Economic hardship grace period]]
For Perkins Loans or NDSLs made ON OR AFTER July 1, 1993, the
hardship deferment has been replaced by the ECONOMIC
HARDSHIP deferment. A school may grant a deferment due to
economic hardship for up to a total of three years. Unlike loans made
before July 1, 1993, loans made after that date do not qualify for
UNLIMITED deferments due to hardship. Also unlike the former
hardship deferment, the new economic hardship deferment allows a
borrower to defer interest as well as principal.

An eligible borrower is entitled to an economic hardship deferment
for periods of up to one year at a time, not to exceed three years
cumulatively if the borrower provides the school with satisfactory
documentation showing that he or she

1. has been granted an economic hardship deferment under either
the William D. Ford Federal Direct Student Loan (Direct Loan)
Program or the Federal Family Education Loan (FFEL) Program
for the same period of time for which the Perkins Loan or NDSL
deferment has been requested;

2. is receiving federal or state public assistance, such as Aid to
Families with Dependent Children, Supplemental Security
Income, Food Stamps, or state general public assistance;

3. is working full time and is earning a total monthly gross income
that does not exceed the greater of

a) the monthly earnings of an individual earning the federal
minimum wage or

b) an amount equal to 100% of the poverty line for a family of two
as determined in accordance with section 673(2) of the
Community Service Block Grant Act;

4. is not receiving total monthly gross income that is more than
twice the amount in (a) or (b) above and that income minus an
amount equal to the borrower's monthly payments on federal
postsecondary education loans does not exceed the amount
specified in (a) or (b) above; or

5. is working full time and has a federal educational debt burden
that equals or exceeds 20% of the borrower's total monthly gross
income and the borrower's total monthly gross income minus such
burden is less than 220% of the greater of

a) the monthly earnings of an individual earning the federal
minimum wage or

b) an amount equal to 100% of the poverty line for a family of two
as determined in accordance with section 673(2) of the
Community Service Block Grant Act.

For information on the minimum wage, contact the Wage and Hour
Division of the U.S. Department of Labor. The telephone number is
(202) 219-7043.

The U.S. Department of Health and Human Services 1997 poverty
line for a family of two is $13,270 for Alaska, $12,200 for Hawaii,
and $10,610 for all other states.

[[Documentation for economic hardship]]
To support a borrower's eligibility for an initial economic hardship
deferment based on the criteria in option 4 above, the school must
collect at least the following documentation:

- evidence showing the amount of the borrower's most recent total
monthly gross income from all sources--that is, the gross amount
of income the borrower received from employment (either full-
time or part-time) and from other sources and

- evidence showing the most recent monthly amount due on each of
the borrower's federal postsecondary education loans, as
determined by the method described below.

[[Determining monthly amount due on education loans]]
To determine the monthly amount due on federal postsecondary
education loans, the school must count only the monthly amount that
the borrower WOULD HAVE OWED on each loan IF IT HAD
BEEN SCHEDULED TO BE REPAID IN 10 YEARS from the date
the loan entered repayment; the school should disregard the actual
repayment schedule or the actual monthly payment amount (if any)
that the borrower would owe during the period for which the
economic hardship deferment is requested.

To qualify for a SUBSEQUENT period of deferment that begins less
than one year after the end of the deferment described in option 3 or
4 above, the school must require the borrower to submit a copy of his
or her federal income tax return if the borrower filed a tax return
within the eight months preceding the date the deferment is
requested.

For purposes of qualifying under option 3 or 5 of the economic
hardship deferment, a borrower is considered to be working full time
if he or she is expected to be employed for at least three consecutive
months for at least 30 hours per week.

[[Rehabilitation training program deferment]]
To qualify for a deferment for study in a rehabilitation training
program, all of the following criteria must be met:

1. The borrower must provide the school with a certification from
the rehabilitation agency that the borrower is either receiving or
scheduled to receive training services designed to rehabilitate
disabled individuals.

2. The borrower must provide the school with a certification from
the rehabilitation agency that one of the following entities licenses,
approves, certifies, or otherwise recognizes the rehabilitation
program as providing rehabilitation training to disabled
individuals:

- a state agency with responsibility for vocational rehabilitation
programs;

- a state agency with responsibility for drug abuse treatment
programs;

- a state agency with responsibility for mental health services
programs;

- a state agency with responsibility for alcohol abuse treatment
programs; or

- the U.S. Department of Veterans Affairs.

3. The rehabilitation agency must certify that the rehabilitation
program provides or will provide the borrower with rehabilitation
services under a written plan that

- is individualized to meet the borrower's needs;

- specifies the date on which the services to the borrower are
expected to end; and

- is structured in a way that requires the borrower's substantial
commitment to his or her rehabilitation. The Department
considers a substantial commitment to be one of 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.

DEFERMENT OF PERKINS LOANS MADE BEFORE
JULY 1, 1993

A borrower of a Perkins Loan made before July 1, 1993 may defer
repayment if he or she is enrolled at least half time as a regular
student in an eligible institution (as explained on page 6-39).

[[Three-year deferment]]
Such a borrower may also defer repayment for up to three years and
interest will not accrue while he or she is

- a member of the U.S. Army, Navy, Air Force, Marines, or Coast
Guard;

- a member of the National Guard or the Reserves serving a period
of full-time active duty in the armed forces;

- an officer in the Commissioned Corps of the U.S. Public Health
Service;

- on full-time active duty as a member of the National Oceanic and
Atmospheric Administration Corps;

- a Peace Corps volunteer;

- a volunteer under Title I, Part A of the Domestic Volunteer
Service Act of 1973 (ACTION programs);

- a full-time volunteer in service for a tax-exempt organization that
the Department has determined is comparable to Peace Corps or
ACTION service;*5* or

- temporarily totally disabled or unable to work because he or she
must care for a SPOUSE OR OTHER DEPENDENT who is so
disabled.*5*

[[Volunteer service comparable to Peace Corps]]
A borrower is considered to be providing service comparable to
Peace Corps or ACTION service if he or she meets all of the
following five criteria:

1. The borrower serves in an organization that is exempt from
taxation under the provisions of Section 501(c)(3) of the Internal
Revenue Code of 1954.

2. The borrower provides service to low-income persons and their
communities to assist them in eliminating poverty and poverty-
related human, social, and environmental conditions.

3. The borrower does not receive compensation that exceeds the
rate prescribed under Section 6 of the Fair Labor Standards Act of
1938 (the federal minimum wage), except that the tax-exempt
organization may provide the volunteer with health, retirement,
and other fringe benefits that are substantially equivalent to the
benefits offered to other employees of the organization.

4. The borrower, as part of his or her duties, does not give religious
instruction, conduct worship service, engage in religious
proselytizing, or engage in fund raising to support religious
activities.

5. The borrower has agreed to serve on a full-time basis for a term
of at least one year.

[[Temporary total disability]]
Temporarily totally disabled, with regard to the borrower, means the
inability due to an injury or illness to attend an eligible school or to
be gainfully employed during a reasonable period of recovery.

Temporarily totally disabled, with regard to a disabled spouse or
other dependent of a borrower, means requiring continuous nursing
or other services from the borrower for a period of at least three
months due to illness or injury.

An affidavit from a qualified physician*6* is required to prove
disability. The definition of dependent for temporary total disability
deferment purposes is the same as the definition used in the Free
Application for Federal Student Aid (FAFSA) for a member of the
independent applicant's household: A borrower's dependent is a child
who receives more than half of his or her financial support from the
borrower or another person who lives with the borrower and who
receives more than half of his or her financial support from the
borrower.

[[Internship deferment]
A borrower whose Perkins Loan was made before July 1, 1993 and
who is serving in a medical internship or residency program is not
considered to be in school for deferment purposes and may not
receive an in-school deferment on that Perkins Loan for the
internship or residency program; however, the borrower is eligible
for an INTERNSHIP DEFERMENT for up to two years.

While the borrower is serving an eligible internship, he or she may
defer repayment for up to two years. Interest will not accrue during
the internship deferment. An eligible internship is one that requires
the borrower to hold at least a bachelor's degree before beginning the
program; in addition, the internship must meet the criteria of
EITHER a OR b below to be eligible:

a. The successful completion of the internship must be required
by a state licensing agency as a prerequisite for certification of the
individual for professional practice or service. For this type of
eligible internship, the borrower must provide the school with the
following certifications:

- a statement from an official of the appropriate state licensing
agency indicating that the successful completion of the
internship is required by the state licensing agency as a
prerequisite for certification for professional practice or service;

- a statement from the organization where the borrower will be an
intern certifying that attaining a bachelor's degree is required to
be admitted in the program;

- a statement from the organization where the borrower will be an
intern indicating that the borrower has been accepted into its
internship program; and

- certification of the dates when the borrower is expected to begin
and complete the program.

b. The internship or residency program must lead to a degree or
certificate awarded by an institution of higher education, a
hospital, or a health care facility offering postgraduate training.
For this type of eligible internship, the borrower must provide the
school with a statement from an authorized official of the
internship program certifying that

- a individual must have a bachelor's degree to be admitted in the
program;

- the borrower has been accepted into the program; and

- the internship or residency program leads to a degree or
certificate awarded by an institution of higher education, a
hospital, or a health care facility that offers postgraduate
training.

A borrower of a Perkins Loan made before July 1, 1993 may also
defer repayment (and interest will not accrue) during a period of

[[One-year "working mother" deferment]]
- up to one year if the borrower is a mother of a preschool-age
child, provided the mother is going to work (or going back to
work) at a salary that is no more than $1.00 above the minimum
hourly wage or

[[Six-month "parental leave" deferment]]
- up to 6 months if the borrower is pregnant, or if he or she is taking
care of a newborn or newly adopted child.*7*

[[Hardship deferment]]
A borrower may defer repayment for hardship, as determined by the
school (for example, if the borrower is facing a prolonged period of
illness or unemployment). Interest will continue to accrue during the
deferment.

[[Post-deferment grace period]]
A borrower is entitled to a 6-month grace period after each of the
deferments that apply to Perkins Loans (a post-deferment grace
period) except after a hardship deferment. Neither the deferment nor
the post-deferment grace period is counted as part of the 10-year
repayment period.

DEFERMENT OF NDSLS MADE BETWEEN OCTOBER 1, 1980
AND JULY 1, 1993

[[At least half-time attendance]]
A borrower of an NDSL made on or after October 1, 1980 but before
July 1, 1993 may defer repayment if he or she is enrolled at least half
time as a regular student in an eligible institution (as explained on
page 6-39).

[[Three-year deferments]]
A borrower may defer repayment for up to three years (and interest
will not accrue) while the borrower is

- a member of the U.S. Army, Navy, Air Force, Marines, or Coast
Guard;

- a member of the National Guard or the Reserves serving a period
of full-time active duty in the armed forces;

- an officer in the Commissioned Corps of the U.S. Public Health
Service;

- a Peace Corps volunteer;

- a volunteer under Title I, Part A of the Domestic Volunteer
Service Act of 1973 (ACTION programs);

- a full-time volunteer in service for a tax-exempt organization the
Department has determined to be comparable to Peace Corps or
ACTION;*8* or

- temporarily totally disabled or unable to work because he or she
must care for a SPOUSE who is so disabled.*9*

[[Two-year deferments]]
A borrower of an NDSL made on or after October 1, 1980 and
before July 1, 1993 may defer repayment for up to two years (and
interest will not accrue) while the borrower is serving in an eligible
internship. An eligible internship is one

- that requires the borrower to hold at least a bachelor's degree
before beginning the internship program and

- that the state licensing agency requires the borrower to complete
as a prerequisite for his or her certification for professional
practice or service.

To qualify for an internship deferment, the borrower must provide
the school with the following certifications:

- a statement from an official of the appropriate state licensing
agency indicating that the successful completion of the internship
is required by the state licensing agency as a prerequisite of
certifying for professional practice or service;

- a statement from the organization where the borrower will be an
intern certifying that attaining a bachelor's degree is required to be
admitted in the program;

- a statement from the organization where the borrower will be an
intern indicating that the borrower has been accepted into its
internship program; and

- certification of the dates when the borrower is expected to begin
and complete the program.

A borrower may defer repayment for hardship, as determined by the
school (for example, if the borrower is facing a prolonged period of
illness or unemployment). Interest will continue to accrue during the
deferment.

[[Deferment provisions for loans made before 10/1/80]]
For all NDSLs made on or after October 1, 1980 and before July 1,
1993, a borrower is also entitled to a 6-month post-deferment grace
period after each of the deferments that apply to those loans except
after a hardship deferment. Neither the deferment nor the post-
deferment grace period is counted as part of the 10-year repayment
period. For information on deferment provisions for loans made
before October 1, 1980, see the 1994-95 Federal Student Financial
Aid Handbook or 34 CFR 674.37.

DEFERMENT VS. POSTPONEMENT FOR SERVICE THAT
WILL QUALIFY FOR LOAN CANCELLATION

For Perkins Loans and NDSLs made on or after July 1, 1993,
deferment of repayment is applicable during periods while the
borrower is performing a service that will subsequently qualify him
or her for cancellation of all or a portion of the loan. A school may
grant a deferment of repayment for up to 12 months at a time.
Interest does not accrue during this period of deferment. A borrower
is entitled to deferment and post-deferment grace periods; therefore,
regardless of the length of time that the eligible service is performed,
repayment is deferred during that period of service and does not
resume until six months after the cessation of service.

Because a borrower of a loan made on or after July 1, 1993 is
entitled to a deferment while performing a service that will
subsequently qualify him or her for cancellation of all or a portion of
the loan, a school that is exercising the minimum monthly payment
provision listed in the promissory note must cease doing so and grant
a deferment to cover any period of qualifying service. The amount to
be deferred and subsequently canceled must be calculated using the
10-year repayment period.

A borrower of a Perkins Loan, NDSL, or Defense Loan made before
July 1, 1993 may NOT receive a deferment during a period while he
or she is performing a service that will subsequently qualify him or
her for cancellation of all or a portion of the loan; rather, a school
must grant POSTPONEMENT of loan repayment for a 12-month
period if the borrower

- notifies the school in writing that he or she is performing a
qualifying service and

- submits a statement specifying that he or she is so employed.*10*

Postponement differs from deferment in the following ways:

- the borrower is not entitled to a postponement;

- the borrower does not receive a grace period following
postponement; and

- interest continues to accrue during postponement.

Because postponement is not an entitlement, a borrower who does
not complete the period required to receive cancellation will be
required to make any payments that had been postponed during the
partial period of service. These payments become due and payable
immediately upon the cessation of service.

A school that is exercising the minimum monthly payment
provisions listed in a borrower's promissory note can still grant
postponement to cover a period of qualifying service. If the school
was originally exercising the minimum payment option, it must cease
doing so if it grants postponement. The amount to be postponed and
subsequently canceled must be calculated using the 10-year
repayment period.

If a borrower has received more than one type of loan but is
performing a service that qualifies only one loan for cancellation, the
school may defer loan payments (or postpone loan payments for
loans made prior to July 1, 1993) ONLY on the loan that qualifies
for the cancellation. The amount due on the loan that is not eligible
for cancellation is the amount the borrower would normally pay.

THE CONCURRENT DEFERMENT PERIOD

If a borrower is teaching or engaged in other services that qualify
him or her for both deferment and cancellation, the loan deferment is
considered to run concurrently with any period for which loan
cancellation is granted.

DEFERMENT AND DEFAULT

A borrower is not entitled to a deferment on a defaulted loan. If the
borrower signs a new repayment agreement, however, a school may
grant a deferment even if the school has accelerated*11* the loan.
The school would have to de-accelerate the loan before granting the
deferment. The policy to permit deferments on defaulted loans
applies to all requests for deferment received after February 3, 1988,
regardless of the date the loan was made.

Before granting a deferment on a defaulted loan, the school may
require the borrower to pay immediately late fees, collection costs,
and some or all of the amount past due as of the date on which the
school determined that the borrower had demonstrated eligibility for
a deferment. The Department encourages schools to require the
borrower to do so, thus "curing" the default.

The borrower must file for deferment on time and provide
satisfactory documentation that he or she qualifies for the deferment.
"On time" means by a deadline that the school establishes. A
SCHOOL IS NOT REQUIRED TO GRANT DEFERMENTS ON
LOANS IN DEFAULT; however, if a school does so, it is expected
to calculate past-due accrued interest. If a school believes this is too
burdensome, it may deny deferments on defaulted loans.

DEFERMENT VS. IN-SCHOOL ENROLLMENT STATUS

A borrower may neglect to notify a school that he or she has enrolled
at least half time at another school before the initial grace period
expires. Because the school would not have this information, the
school would assume that the student's repayment period had started
and might demand payment from the borrower. In such a case, a
borrower often requests a deferment rather than a continuation of his
or her in-school status. Because the borrower reenrolled at least half
time before the initial grace period expired, repayment had not yet
started, and a deferment would not be appropriate.

The borrower may submit proof at any time--even after a loan has
been accelerated--that he or she reenrolled at least half time before
the initial grace period expired and that the repayment period should
have begun later than the date originally calculated. THE SCHOOL
MUST RECALCULATE THAT DATE IF IT RECEIVES THIS
PROOF. The school must also deduct from the loan balance any
interest accrued and any late charges added before the date the
repayment period actually should have begun.

Note that the borrower remains responsible for payments that would
have been due under the recalculated repayment period and that the
school is not obligated to grant a deferment for any payments past
due under that period.


*1* In-school deferments may no longer be granted to a borrower
while serving in a medical internship or residency program, except
for a program in dentistry.

*2* The borrower must provide certification that he or she has been
accepted for or is engaged in full-time study in the school's graduate
fellowship program.

*3* These deferments may not be granted in excess of three years.

*4* See Section 5, "Cancellation."

*5* See the criteria on the next page.

*6* A qualified physician is a doctor of medicine or osteopathy who
is legally authorized to practice medicine.

*7* This deferment is called a parental leave deferment. The
borrower must be unemployed and not attending school and must
apply for deferment within six months of leaving school or dropping
below half-time status.

*8* See the volunteer service criteria on page 6-44.

*9* See the discussion of temporary total disability on page 6-44. A
physician's statement is required.

*10* The statement must be signed by a responsible official in the
military, agency, or school employing the borrower, and the
statement must describe the borrower's job, list the period of
employment, and state whether the job is full- or part-time.

*11* Acceleration is one of the penalties a school may impose on a
defaulted loan. A loan that has been accelerated becomes due and
payable immediately in one lump sum.

Last Modified: 07/21/1998