College in Colorado

Student Loans And Hardship

If you’re behind in payments on your student loans, you may qualify for relief due to hardship.
Education loans fall into one of three categories:
  • federal student loans (such as Perkins and Stafford Loans)
  • federal parent loans (Plus Loans)
  • private student loans (such as private or alternative student or parent loans offered by banks and credit unions)
You may be more likely to qualify for hardship relief for federal student loans than private student loans.
Below are examples of student loan hardship options:
Economic Hardship Deferment For Student Loans
An economic hardship deferment for student loans is typically used for unemployment, maternity leave, medical leave, or disability. If you qualify, you’ll be able to defer student loan payments for up to 3 years. During the deferment period, interest on your subsidized Stafford student loan debt won’t accrue, but interest will accrue on unsubsidized Stafford loans and other student loans.
Economic Hardship Forbearance For Student Loans
Forbearance for student loans payment is similar to economic hardship deferment, except that interest on all loans continues to accrue during the forbearance period. With forbearance, student loan payments can be suspended for up to 5 years, or longer, depending on your agreement with your lender. Typically, forbearance is granted for situations such as medical leave, maternity leave, disability, and job loss.
Bankruptcy And Student Loans
Less than 1% of people are able to include federal student loans in bankruptcy filings, because “undue hardship” has to be proven. Undue hardship is defined as the inability (now or in the future) to repay the student loan debt and still maintain a minimal standard of living. An example of this might be a person who becomes sick or injured to the point at which he or she is no longer able to perform any wage-earning job, now or in the future. Federal student loans are also discharged upon the death of the borrower.
To find out if you qualify for student loan hardship, contact your lender immediately; don’t wait until you’re late on your student loan payments.
See these related articles on student loans:
Student Loans – What To Do If You’re Behind In Your Payments
Student Loan Forgiveness
Student Loans And Bankruptcy

©2012, Money 101. Money 101 is a CollegeInvest program, sponsored by the  Colorado Department of Higher Education.

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