04.28.09 | Student Loan Default Rates On the Rise?
It is no surprise that the default rate on Federal student loans is the highest it has been since 1998. It can be kind of 
tough to make your monthly loan payments when you don’t have a job. With unemployment rising, so to is people’s inability to keep up with their student loan payments. The good news? You do have options if you can’t pay. To find out what your options are you first need to determine whether you have Federal loans or private loans or both.
If you are unsure what type of loans you have, be it Federal or private student loans, then you will need to do 2 things. First, you should check the national student loan database, which will pull up every Federal student loan you have ever borrowed. To access this database you will need your four digit FAFSA pin and your social security number. If you do not know your PIN number you will have to visit the Department of Education’s PIN site first. Once you have figured out what loans are federal, you may want to check your credit report to see if you have any private student loans. If you only got loans by filling out the FAFSA each year then most likely you do not have any private loans. To access a free credit report the best site is annual credit report.com. If you find that you have both federal and private loans, you need to deal with each type of loan separately. Federal loans are entirely separate from private loans, even if they are serviced by the same company.
So what are your options? For your Stafford loans, grad plus loans, and even parent plus loans, you have 2 main deferment choices: unemployment deferment and economic hardship deferment. You also have in school deferment options if you decide to go back to school. In order to apply for one of these options, you will need to either apply online at your loan servicer’s website, or you will need to download a form from their website and mail it in (you can get your loan servicer name directly from the nslds website). In school deferment forms typically need to be mailed in because they must be stamped by your school.
If you apply for a deferment and you are not approved, then you still have options. Forbearance is your next best bet, and you have up to three years of forbearance time with federal loans. Forbearance consists of putting your loan payments on hold. Interest will accrue on the loan and if you do not pay the interest during this period it will be capitalized no more than four times a year. This means that the interest accrued will be added to the principal balance and you will essentially be paying interest on interest. You can typically put your loans on forbearance simply by requesting one through your loan servicer. Remember that you have up to three years of forbearance time.
For private loans, deferment and forbearance options vary by each loan company, and typically provide less time than with federal loans. You should contact your private loan company to see what your options are.
If you currently have a federal loan or loans in default, and you can’t afford the monthly payments that the debt collection agency is demanding, you should call the US Dept of Education’s default center at 1800-621-3115. They can buy your defaulted loan from the agency and work out a rehabilitation program with you. If you just ignore your defaulted loan then eventually the government will garnish your paycheck and take your tax returns and part of your social security benefits.
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