Dealing with unemployment – federal vs private loans

I have a number of loans that are serviced by various different agencies and, having recently become unemployed, I have needed to put all of my loans into delayed payment.  For some loans, that means deferment, for others that means forbearance; so what is the difference.

Private loans, that is loans that are not guaranteed by the federal government, have to be put into forbearance, which is an agreement on behalf of the lender to not begin foreclosure proceedings, and in the case of student loans, not allow the borrower to go into default during the time that he/she can not make payments.  Because the loans aren’t insured, this usually means jumping through extra hoops (such as a detailed list of revenues and expenses) that have to be completed and returned through the mail or by fax.  If you are already behind on payments and are receiving calls, you should make every effort to get your loan put into forbearance, but you do not have to give out personal information to unsolicited callers if you are uncomfortable doing so.  I deal with this by simply not answering or refusing to verify my identity, and then immediately calling my loan servicer myself and checking on the status of my account/forbearance request.  Even if you have already mailed your request, it can take days to reach your lender and then several more day to be processed. You may continue to receive calls during this time.

Federally backed loans can be put into a period of deferment, which is simply an agreement to temporarily suspend payments, and tends to be much easier to do.  In some cases, your loan servicer can put your loan into deferment over the phone, though the specific procedure depends on who services your loan.  One thing to know about federal loans and deferment is that if your loans are subsidized then the government will pay the interest during the period of deferment, if your loans are unsubsidized, then interest will continue to accrue and be capitalized at the end of the deferment period.  The way to avoid this is make interest payments on your loans during the period of deferment.

the most important thing to remember is that there are options for dealing with student loans during periods of unemployment and you have to do the legwork to avoid damages to your credit.

Here’s the link to the Dept of Education’s article on payment postponement
http://studentaid.ed.gov/PORTALSWebApp/students/english/difficulty.jsp

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About cookinablackhat

I cook. That is what I do. I go to work every day and cook professionally and then on my days off, I cook some more. I love everything about it. I love the chemistry, the alchemy and magic, and I want to know more.
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