Federal Student Aid - IFAP
   
AwardYear: 1995-1996
EnterChapterNo: 6
EnterChapterTitle: Federal Perkins Loan Program
SectionNumber: 4
SectionTitle: Forbearance and Deferments
PageNumbers: 37-50



[[Definition of forbearance]]
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 the temporary cessation of payments,
allowing an extension of time for making payments, or accepting
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 provisions are included in Section
674.33(d) of the Final Rule published in the Federal Register on
November 30, 1994. Forbearance is available for all Perkins Loans
and NDSLs, regardless of when they were made.

[[May grant forbearance one year at a time for up to 3 years]]
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. 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 upon the terms of forbearance in writing. The
forbearance must be in the form of a temporary cessation of
payments unless the borrower chooses one of the alternative types of
forbearance (an extension of time for making payments, or accepting
smaller payments).

[[Criteria for granting forbearance]]
A school must grant forbearance if the total amount the borrower is
obligated to pay monthly on all Title IV SFA loans is equal to or
greater than 20 percent 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 to determine the equivalent monthly payment
amount. The school must require the borrower to submit at least the
following documentation:

[[Evidence the borrower must submit]]
- evidence showing the amount of the most recent total monthly
gross income received by the borrower and

- evidence showing the amount of the monthly payments owed by
the borrower for the most recent month for the borrower's Title
IV SFA loans.

[[Definition of "total monthly gross income"]]
"Total monthly gross income," as defined in Section 674.2 of the
November 30 Final Rule, 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 for other acceptable reasons, or
if ED authorizes a period of forbearance due to a national military
mobilization or other national emergency.

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 a deferment (with the exception of
hardship deferments, during which INTEREST DOES ACCRUE).
For loans made ON OR AFTER July 1, 1993, the hardship
deferment has been replaced by the ECONOMIC HARDSHIP
DEFERMENT, which may not be granted in excess of 3 years;
INTEREST DOES NOT ACCRUE during the new economic
hardship deferment. Federal Perkins Loans and NDSLs share
several deferment provisions in common; however, other deferment
provisions are not applicable to every type of loan.

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.

[[Borrower obtains deferment form from school]]
[[Must file annually]]
Borrowers must apply for a deferment in writing. They may do this
by obtaining a form from the business or student loan office of the
school that made them 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, by the date that the
school establishes. (ED 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

[[At least half-time enrollment required]]
A borrower may defer repayment of a Federal Perkins, Direct, or
Defense loan if he or she is enrolled at least half time in an eligible
institution. 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 U.S. approved by
the U.S. Department of Education for this purpose. However, it is
not a requirement that the school participate in the Federal Perkins
Loan Program. Interest will not accrue during the deferment. A
"regular student" is one who is enrolled for the purpose of obtaining
a degree or certificate. If the borrower is attending as at least a half-
time 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.

If a school ceases to qualify as an institution of higher education, the
borrower's deferment ends on the date the school ceases to qualify.

DEFERMENT OF FEDERAL PERKINS LOANS AND NDSLS
MADE ON OR AFTER 7/1/93.

[[In-school deferments]]
For loans made on or after July 1, 1993, a borrower may defer loan
repayment, and interest does not accrue while the borrower--

- is enrolled and in attendance as a regular student in at least a
half-time course of study at an eligible institution;

- is enrolled and in attendance as a regular student in a course of
study that is part of an approved graduate fellowship program
approved by ED (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);

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

[[Residency program in dentistry]]
- is serving in a residency program in dentistry (deferments may
no longer be granted to a borrower while serving in a medical
internship or residency program, except for a program in
dentistry);

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

[[Unemployment]]
- is seeking and is unable to find full-time employment (this
deferment may not be granted in excess of 3 years);

[[Economic hardship]]
- is suffering an economic hardship, discussed below (this
deferment may not be granted in excess of 3 years); or

- is engaged in certain types of service that qualifies the borrower
for cancellation of the loan (refer to Section Five:
"Cancellation").

[[Post-deferment grace period]]
A borrower is entitled to a 6-month grace period after each of the
deferments that apply to Federal Perkins Loans and NDSLs (a
"post-deferment" grace period). Neither the deferment nor the grace
period is included in determining the 10-year repayment period.

ECONOMIC HARDSHIP DEFERMENT

[[3-year economic hardship deferment replaces hardship deferment]]
For Federal Perkins Loans and NDSLs made on or after July 1,
1993, a school may grant a deferment due to "ECONOMIC
hardship" up to a MAXIMUM OF 3 YEARS (a school may not
grant a borrower unlimited deferments due to "hardship" for Federal
Perkins Loans and NDSLs made on or after July 1, 1993). The Final
Rule of November 30, 1994 includes the new economic hardship
deferment provisions in Section 674.34(e).

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

1. has been granted an economic hardship deferment under either
the FDSL or FFEL programs for the period of time for which
the borrower has requested the deferment forhis or her Federal
Perkins Loan;

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 percent 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 from all sources
that is more than twice the amount in (a) or (b) above and,
after deducting an amount equal to the borrower's monthly
payments on federal postsecondary education loans, the
remaining amount of income 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 percent of the borrower's adjusted
gross income, and the difference between the borrower's
adjusted gross income minus such burden is less than 220
percent of the greater of-

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

b) an amount equal to 100 percent of the poverty line for a
family of two, 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 1994 poverty level for a family of two was $12,300 for Alaska,
$11,320 for Hawaii, and $9,840 all other states.

For additional information on the poverty level for a family of two,
contact the Office of the Assistant Secretary of the U.S. Department
of Health and Human Services. The telephone number is (202) 690-
6141.

[[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 received by the borrower from employment
(either full-time or part-time) and from other sources; and

- evidence showing the most recent monthly amount due on 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 eight months prior to the date the deferment is
requested.

[[Working full time]]
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 at 30 hours per week.

[[Rehabilitation training program deferment]]
To qualify for a deferment for study in a rehabilitation training
program, the borrower must be receiving, or be scheduled to receive,
services under a program designed to rehabilitate disabled
individuals and must provide the school with the following
documentation:

1. a certification from the rehabilitation agency that the borrower
is either receiving or scheduled to receive rehabilitation
training services from the agency and

2. a certification from the rehabilitation agency that the
rehabilitation program Is licensed, approved, certified, or
otherwise recognized by one of the following entities 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 Department of Veterans Affairs.

3. The rehabilitation agency must also 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 a substantial commitment
by the borrower to his or her rehabilitation. ED considers a
substantial commitment by the borrower to be a commitment
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 FEDERAL PERKINS LOANS MADE BEFORE
7/1/93

[[In-school deferment]]
A borrower of a Federal 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 of higher education (or a
comparable institution outside the U.S. approved by the U.S.
Department of Education for this purpose). Additional information
about the "In-School Deferment" is included in the previous
discussion about loans made on or after July 1, 1993.

[[3-year deferments]]
A borrower of a Federal Perkins Loan made before July 1, 1993,
may defer repayment for up to 3 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;

- 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);

[[Comparable Volunteer Service]]
A borrower is considered to be providing service comparable to
Peace Corps or ACTION service if he or she meets 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 health, retirement, and other
fringe benefits to the volunteer 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; and

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

[[Temporary total disability]]
"Temporally 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 3
months due to illness or injury.

- a full-time volunteer in service for a tax-exempt organization
that ED has determined is comparable to Peace Corps or
ACTION service (see the criteria in the box above); or

- temporarily totally disabled or unable to work because he or she
must care for a SPOUSE OR OTHER DEPENDENT who is so
disabled (see the definitions in the box above).

An affidavit from a qualified physician is required to prove
disability. The definition of "dependent" for the temporary total
disability deferment is the same as that used in the application for
federal student aid-a child who receives more than half support or
other person who lives with and receives more than half support
from the borrower.

A borrower of a Federal Perkins Loan made before July 1, 1993,
who is serving in a medical internship or residency program may
not defer repayment of a Federal Perkins Loan BASED ON THE
BORROWER’S FULL-TIME OR HALF-TIME STUDY; however,
the borrower is eligible for an INTERNSHIP DEFERMENT
(described on the next page) for up to 2 years.

[[Internship deferment]]
A borrower of a Federal Perkins Loan made before July 1, 1993,
may defer repayment for up to 2 years and interest will not accrue
while the borrower is serving an eligible internship. An eligible
internship is one that requires the borrower to hold at least a
bachelor's degree before beginning the program; in addition, it must
meet the criteria of EITHER a OR b below:

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 that the successful completion of the internship is
required by a 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 a bachelor's degree must be attained
in order to be admitted in the program;

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

- 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 in order to be
admitted in the program;

- the borrower has been accepted into its 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.

[[1-year "working mother deferment]]
[[6-month "parental leave" deferment]]
A borrower of a Federal Perkins Loan made before July 1, 1993,
may also defer repayment and interest will not accrue during a
period of-

- up to 1 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 in excess of the
minimum hourly wage or

- up to 6 months if the borrower is pregnant, or if he or she is
taking care of a newborn or newly adopted child. (This
deferment is called "parental leave.") The borrower must be
unemployed and not attending school and must apply for
deferment within 6 months of leaving school or dropping below
half-time status.

[[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). However, 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 Federal Perkins Loans (a "post-deferment"
grace period) except after the deferment for hardship. Neither the
deferment nor the grace period is included in determining the 10-
year repayment period.

DEFERMENT OF NDSLS MADE BETWEEN 10/1/80 and 7/1/93.

The following deferment provisions are applicable to NDSLs made
on or after October 1, 1980, but before July 1, 1993:

[[At least half-time attendance]]
A borrower may defer repayment if he or she is enrolled at least half
time as a regular student in an eligible institution of higher
education or a comparable institution outside the U.S. approved by
the U.S. Department of Education for this purpose.

[[3-year deferments]]
A borrower may defer repayment for up to 3 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
ED has determined is comparable to Peace Corps or ACTION
(see the volunteer service criteria in the box on page 44); or

- temporarily totally disabled or unable to work because he or she
must care for a SPOUSE who is so disabled (see the definitions
in the box on page 44). A physician's statement is required to
prove disability.

[[2-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 2 years and
interest will not accrue while the borrower is serving 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; in addition, the completion of the internship must be
required by the State licensing agency as a prerequisite for
certification of the individual for professional practice or service.
The borrower must provide the school with the following
certifications:

- a statement from an official of the appropriate State licensing
agency that the 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 a bachelor's degree must be attained in
order to be admitted in the program;

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

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

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

[[Post-deferment grace period]]
[[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
for hardship deferments. Neither the deferment nor the grace period
is included in determining 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 Section 674.37 of the regulations.

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

Deferment of repayment is applicable for periods of service that
qualify the borrower for cancellation of a loan made on or after July
1, 1993. A school may grant a deferment of repayment for up to 12
months at a time. Interest does not accrue during a period of
deferment. Deferment is an entitlement to the borrower; therefore,
regardless of the length of time that the service is performed,
repayment does not begin until six months after the cessation of
service.

Postponement in anticipation of cancellation is applicable only
during periods of service that qualify the borrower for cancellation
of a loan made before July 1, 1993. A school may grant
postponement of repayment for up to 12 months at a time. Interest
continues to accrue during the period of postponement.
Postponement of repayment is not an entitlement to the borrower;
therefore, should the borrower not complete the period required to
receive cancellation benefits, any payments that had been postponed
during the partial period of service become due and payable
immediately upon the cessation of service.

If a borrower has received more than one type of loan (Federal
Perkins Loan and NDSL), but is not eligible for cancellation benefits
on both types, the school may defer loan repayments (or postpone
loan repayments for loans made prior to July 1, 1993) ONLY on the
loan(s) for which cancellation will be available.

A school may not exercise the minimum monthly repayment
provisions on a note when the borrower has received a partial
cancellation for the period covered by a deferment. (If the school
was originally exercising the minimum repayment option, it must
cease doing so.) If a borrower has received more than one loan, but
not all can be cancelled, the amount due on the uncancelled loan(s)
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

[[Deferment when loan is in default]]
A borrower in default is NOT ENTITLED to a deferment, but a
school MAY grant a deferment if the borrower signs a new
repayment agreement. The policy to permit deferments on defaulted
loans applies to ALL requests for deferment received after February
3, 1988 (the effective date of the December 1, 1987 campus-based
regulations), REGARDLESS OF THE DATE THE LOAN WAS
MADE. The borrower must file for deferment on time and provide
satisfactory documentation that he or she qualifies for the deferment.
SCHOOLS ARE NOT REQUIRED TO GRANT DEFERMENTS
ON LOANS IN DEFAULT; however, if they do, they are expected
to calculate past-due, accrued interest. If schools believe this is
unduly burdensome, they may deny deferments.

[[Deferment when loan is accelerated]]
Once the borrower misses a scheduled payment, he or she is in
default for purposes of determining the borrower's status for new
federal student aid. However, if the borrower enters into a new
written repayment agreement, the school may grant a deferment
EVEN IF THE SCHOOL HAS ACCELERATED THE LOAN.
However, the school would have to de-accelerate the loan. ED
encourages schools to require the borrower to repay immediately
some or all of the past-due amounts as a condition of the new
agreement-thus "curing" the default. "Past-due amounts" are those
scheduled to be repaid before the date the school determined that
grounds for a deferment existed. Past-due amounts include late
charges, penalty charges, and collection costs.

DEFERMENT VS. IN-SCHOOL ENROLLMENT STATUS

At times a borrower may neglect to notify a school that he or she has
continued studies at least half time at another school prior to
completion of the initial grace period. As the school would not have
this information, the financial aid administrator would assume that
the student's repayment period had started and might demand
payment from the borrower. In such a case, borrowers often request
relief in terms of a deferment, rather than on the basis of their
student status. Actually, as the borrower was still enrolled at least
half time, and had never completed the initial grace period, the term
"deferment" would not be appropriate, as the repayment period had
not started. The borrower may submit proof at any time-even after
a loan has been accelerated-that the initial grace period had never
been completed 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 began.

Note that the borrower remains responsible for payments that would
have been due in any event, and the school is not obligated to grant
a deferment for any past-due payments