Policy Frequently Asked Question: Forbearance Information Lenders Must Provide to Borrowers

Lenders granting forbearance on education loans always have been required to provide specific information to the borrower regarding the forbearance period. The Higher Education Opportunity Act requires the lender to provide additional information. What are the new items of information that the HEOA requires lenders to include in these notifications?

Lenders are required to provide initial and periodic notification to borrowers whose loans are in a forbearance status. When the lender grants forbearance, the HEOA requires the lender to provide information to the borrower or endorser to help ensure an understanding of how interest is capitalized, as well as capitalization’s effect on the loan’s principal and the amount of interest the borrower will pay over the life of the loan.

Several of the data elements included in the new law for periodic forbearance notices were required in the notices prior to the HEOA’s enactment. There are a few notable additions to the required information, however.

In addition to data required prior to Aug. 14, 2008, the lender now must provide in the periodic forbearance notification each of the following items of information:

• The amount of interest accrued since the lender last provided interest accrual information to the borrower.
• The amount of interest that will be capitalized and the date that the capitalization will occur.
• The borrower’s option to pay the interest prior to capitalization.

The changes were effective Aug. 14, 2008. Lenders are expected to have made efforts to comply with the statutory changes as quickly and comprehensively as possible following this date.