Deferment and Forbearance

  • When a lender processes an in-school deferment on a Federal PLUS loan for a graduate student, what should be the end date of that deferment?
    If the loan certification or other information used to determine the borrower’s eligibility for deferment includes the anticipated graduation date, the lender should process the deferment with the anticipated graduation date as the end date. If such information does not include an anticipated graduation date, the lender may process the deferment through the end of the academic period certified in the loan information, or through the anticipated graduation date of record on the loan — whichever is later. See Common Manual subsection 11.6.C.

    According to the federal Deficit Reduction Act of 2005, graduate and professional students are eligible to receive Federal PLUS loans certified on or after July 1, 2006.
  • We received an economic-hardship deferment for a borrower who is in the Peace Corps. The deferment form is signed by the borrower’s power of attorney. Is this acceptable?
    In general, USA Funds® recommends that lenders and lender-servicers confirm that the power of attorney executed by the borrower is broad enough to allow the person who is acting as power of attorney to negotiate the deferment. If the power-of-attorney responsibilities extend to loan transactions, the lender can process the deferment form with the power of attorney’s signature.

    USA Funds encourages your lending institution to consult with your in-house legal representatives to ensure that they concur with any steps you take regarding the use of the power of attorney to endorse a deferment form.

  • If a borrower has used an unemployment deferment in the past (for example, the borrower had an unemployment deferment May 2000 through July 2000), is that deferment period considered the initial deferment? If so, would any unemployment deferments thereafter have backdating restrictions?
    The "initial" period is considered to be the first time that the borrower applies for the deferment in the current "stream" of deferment entries. A borrower could have multiple "initial" periods.

    For example, the borrower applies for unemployment deferment in May 2000. This first application for deferment is an "initial" period. The borrower uses only three months of deferment before calling to say he's back at work. The deferment ends. (If the borrower had renewed that deferment, there would have been no backdating rules on that subsequent deferment period.)

    The same borrower calls in 2003, stating that he is unemployed again. The first deferment application for this new period is another "initial" period. This time the borrower does not obtain employment prior to the end of the deferment period, and requests an extension to the "initial" deferment period. Even though the borrower's request to extend the deferment is not received promptly by the end of the deferment, there are no backdating rules on the renewal.

  • Borrowers must register with a public or private employment agency to be eligible for an unemployment deferment. Would a borrower's registration with an Internet job-placement service meet this requirement?
    USA Funds believes that the intent of this requirement is to ensure that the borrower is attempting to obtain employment in any field. Therefore, registration with an Internet-based employment service would meet this requirement.