Interviewer: Similar to mortgages, do student loans tend to get sold back and forth to different companies over the years or do they stay with where you got them from?
A. Campbell: That’s a real big problem as well. It’s just like mortgages. You’re happy paying your mortgage to one company and then suddenly, it gets transferred for unknown reasons and then you’re dealing with this other company.
Your Student Loan Can Be Purchased by another Lender
Student loans operate the same way. They get bought and sold. For me, I’m still paying my student loans as well, and they’re quite sizable. It gets very frustrating having to deal with a new lender because then I’ve got to remember new details about my monthly payments. I’ve got to set up automatic payments again. It’s frustrating to deal with that.
If You Are Having Difficulty Repaying Student Loans, How Can Attorney Campbell Assist You?
Interviewer: I used to remember they would have special services to help students out. You could forbear a loan, which I believe meant pause it for a while. What are some of the services you can assist with for the people that are having difficulty paying their student loans?
Loan Deferment or Forbearance: Which Option Is Better for You?
A. Campbell: That’s a good question. There’s deferment versus forbearance. There’s differences between the two. That’s pretty much the first choice people make before they even think about coming to an attorney or trying to figure these things out. Deferment requires a paper application and it requires documentation to prove the qualifications.
You Must Prove Eligibility to Receive a Deferment
Interviewer: The student has to provide proof of hardship?
Government Student Loans Have a Six Month Repayment Grace Period
A. Campbell: Yes, deferment requires a representation in writing and documents to back it up.
Typically, the person applying would need to substantiate, “I can’t make my payments now. Can I defer my repayment?” Technically speaking, when you’re dealing with governmental loans, you are allowed a six months repayment grace period. That’s pretty standard. After you graduate, you have six months where you don’t have to pay that are not subject to a penalty.
There Is No Grace Period with Private Student Loans
Then once that grace period is up, you have to start paying the loan back. With private loans you do not receive a grace period. There are the options of deferment and forbearance.
When You Are Approved for a Deferment as Opposed to Forbearance, the Interest on Subsidized Loans Is Paid by the Government
The advantage with deferment and probably the reason why you need to prove your eligibility with documents is that the interest on subsidized loans is paid by the government when you’re in deferment. That is not the case when you’re in forbearance.
The essentially offer the same option. Both allow the borrower to extend the grace period for nonpayment for another year.
Attorney Campbell Advises against Letting a Creditor Steer You towards Applying for Forbearance as Opposed to a Deferment
Interviewer: It seems more beneficial for someone to apply for a deferment because the interest may be paid during the deferred period. However, does it require a great deal of effort on behalf of the borrower to be approved?
A. Campbell: That’s why the number one warning to people out there is don’t let the lender steer you into forbearance because the loans, the interest will still capitalize. While with deferment, the interest will not capitalize.
Interviewer: Let’s talk about forbearance a bit more. Forbearance will allow you not to pay for it a while, but in the background, your loan is growing and growing because of the interest, is that right?
A. Campbell: The interest on subsidized loans is not going to be paid by the government during forbearance, while it is during deferment.
The Typical Deferment or Forbearance Grace Period Is One Year; If You Require a Longer Grace Period, You Must Reapply Every 12 Months
Interviewer: How long is a typical forbearance or deferment period?
A. Campbell: One year and every year you have to re-apply to extend the grace period.