Should I take forebearance on my student loans?

I have student loans a little over $50,000 and I am currently 278 in default. BUT…I work for Americorps, a national service project that is suppose to pay the interest on my loans and automatically qualify for deferment. I have been since AUG 2008. I also want to continue my education in the FALL 2009 and get the Pell grant (no more loans) but I must be able to qualify. My supervisor is saying he can fix it. But they say I can be SOLD and then my future wages will be garnished. What should I do!

MsLove:

I’m linking to the AmeriCorps page that explains the forbearance option on student loans – you’ll see that there are a few issues involved:

First of all, “forbearance” is not an automatic benefit of any loans other than the federal loans. Private lenders MAY grant a forbearance, but that determination is completely at their discretion. Forbearance as a matter of “right” is a unique feature of the government loans.

Secondly, you must complete a “Forbearance Request for National Service” form, which you can obtain from the program staff. You’ll need to complete a separate form for all of your different loan holders, and clearly indicate that you are requesting a forbearance based on your AmeriCorps service. That form must be submitted to the National Service Trust, which will authorize your request, and pass it on to your loan holders.

One concern – student loans that are in default are not eligible for forbearance – you would need to resolve the default issue, first. You mentioned a small amount that you said represents your “default” – don’t confuse a past due amount for a default. If your lender has classified your loans as “in default”, you would have received a letter that makes that determination abundantly clear. If you’re simply a month or two behind, you may be in default of your loan agreement, but your loans are not technically “in default”. As long as they are not in default, you can apply for forbearance.

Deferment, though it also results in a postponement of your obligation to repay, is an altogether different animal than forbearance. The AmeriCorps materials are a little more mysterious about what loans and which volunteers qualify for deferment, as opposed to forbearance.

Review this paragraph from the AmeriCorps Vista Handbook:

“As a general rule, AmeriCorps*VISTA members may obtain a deferment (discussed later in this chapter) of payments on the principal of any federally guaranteed student loan for the length of their AmeriCorps*VISTA service. For federal student loans, interest deferments and/or subsidies may also be available. The terms and conditions of available defermentsdiffer depending on the type of loan, the date the loan was disbursed, and the policies of the individual loan holder. Some older federal student loan programs allow AmeriCorps*VISTA members a categorical deferment. Newer federal loan programs may require that you apply for an “economic hardship” deferment.”

Your best resource to getting this resolved will definitely be your program staff, and the National Service Trust, who can advise you on your unique, personal circumstances.

I hope this helped you – good luck to you – and thanks for your service!