Your federal loans come with some built in benefits. Don’t be shy about using them in time of need.
Federal loan deferment is used in a number of circumstances and many students take advantage of this benefit prior to law school, while in law school and even during the repayment years after law school. It’s important to know the status of your loans in order to understand how the rules of deferment apply to your loans. There are three main categories your loans could fall into:
- Loans taken out prior to law school
- Loans taken out after law school
- Loans taken out during law school for which you may be eligible for a postponement of payment
LOANS TAKEN OUT PRIOR TO LAW SCHOOL
If you borrowed loans prior to entering law school and deferred those loans while enrolled at HLS, you will now need to contact your lender to find out when they go into repayment. It may be that you have used all of your grace period and are to begin repayment 30 days after the last day of class (not graduation date). However, you may not have used your grace period and thus still have a number of months before you are required to make a payment, depending on the program. Again, you will need to contact each lender in order to find out when your first payment is due.
Keep in mind that you are responsible for the repayment of the loan even if the bill goes to the wrong address. Hopefully you have been in contact with your lenders during your time at HLS in order to update your address as often as necessary. If you are unsure of your prior loan history, you will need to look it up on your StudentAid.gov dashboard. This site will give you your federal loan history. If you borrowed non-federal loans, and are uncertain as to who your lender is, you will need to contact the school through which you borrowed the funds. They may be able to help you contact the private loan company if you do not have those records. If they cannot help you, keep in mind that all loans are listed on your credit report. While each credit report (Experian, Equifax, and TransUnion) has similar information, you’ll want to look at all three reports to ensure that you have accounted for all of your borrowing history and to verify that all of the information is correct.
LOANS TAKEN OUT AFTER LAW SCHOOL
If you decide to continue your education by enrolling, at least part time, in a degree seeking program you can defer your federal loans (Direct/FFELP Stafford, Perkins and Grad Plus). The loans will defer in the same way they did while you were enrolled at HLS. In other words, if the loan accrued interest while you were enrolled at HLS, then it will continue to accrue interest while you are pursuing your new degree. If the loan was subsidized, then you will not accrue interest while enrolled in your new degree program. You should always contact the lender to verify their deferment policy and procedures. Many lenders have an online application making the deferment process very easy. Be sure to check on the status of your loan once you do submit a deferment form since the lender will require a payment from you if the deferment is not received or approved by the payment due date.
ECONOMIC HARDSHIP DEFERMENT, UNEMPLOYMENT DEFERMENT, MILITARY SERVICE OR POST ACTIVE DUTY DEFERMENT
There are several other types of deferment. Many students who go into a clerkship will request Economic Hardship Deferment for the length of their clerkship. Talk to your lenders about economic hardship deferment options. If you are unemployed during a deferral period or at any point in time during repayment, you may qualify for an unemployment deferment on your federal loans. Similarly, if you are in active military service or post active duty, you may qualify for a deferment on your federal loans. If you qualify for any of these deferment options, your subsidized loans will continue to receive their subsidy, i.e. the federal government will pay the interest on these loans during your deferment period.
If you are temporarily unable to meet your repayment schedule and are not eligible for a deferment, you may be eligible to receive forbearance. Interest continues to accrue on loans during any period of forbearance. You may also be required to make monthly interest payments. Forbearance is different from deferment in that it helps students experiencing financial hardship to lower their monthly payment amount during repayment. Lenders may grant forbearance for various reasons: financial hardship, poor health, national military mobilization, national emergency, or service in AmeriCorps. You must continue making scheduled payments until you are notified that the forbearance has been granted. Failure to do so may result in a past due status and a negative credit rating.
Forbearance is not tied to enrollment status. If you have borrowed federal student loans, you are eligible for up to three years of forbearance. It is unlikely that a lender will give you three years of forbearance all at once. You will most likely receive six to nine months of forbearance and then have to re-apply if more time is needed. In order to obtain forbearance, you must submit the appropriate paperwork to each lender from whom you are requesting forbearance. The lender will review your application and negotiate a lower monthly payment with you. Sometimes the lender will give you a zero monthly payment amount based on your income and debt; however, many lenders will require you to make interest-only payments to minimize the amount of interest you will pay overall, since interest accrues during forbearance.
Keep in mind that during forbearance any unpaid interest is capitalized and added onto the principal balance when the loan comes out of forbearance. If you choose to consolidate your loans and at some point need to request forbearance, you may lose any repayment incentive benefits that a specific lender offered. Check with the lender before applying for forbearance, then weigh the pros and cons according to your personal finances. There are also certain types of forbearance and you will want to check with your lender regarding the type of forbearance that is best for you given your specific situation at the time of your request. See if you qualify for an Economic Hardship Deferment before you request forbearance. This type of forbearance will give you the added benefit of minimizing the amount of interest you accrue during forbearance since Economic Hardship Deferment will allow your subsidized loans to remain subsidized.
Students and alumni who use forbearance will need to be aware that LIPP will not cover any interest that has accrued during a period of forbearance.
Private lenders are not required to offer you any forbearance options but many lenders will work with a borrower in order to assist them in making on-time payments. Additionally, you may lose your borrower benefits if you put your loans into forbearance since many of them require the first 12 payments to be made on time. A private loan lender or servicer may charge a fee for the use of forbearance. For more information on forbearance contact your lender and review the federal guidelines.
There are two types of student loan consolidation programs: Federal Direct Consolidation and private loan consolidation.
FEDERAL DIRECT CONSOLIDATION
Federal Direct Consolidation allows you to combine one or more federal loans (Perkins, Stafford and GradPLUS) into one new loan with one interest rate. The interest rate will depending on which loans you consolidate and will be based on the weighted average of your outstanding loan amounts at the loans’ current interest rates. You will lose some federal loan benefits when you consolidate your loans such as loan forgiveness on the Perkins loan program or your grace period depending on when you choose to consolidate. Since determining the interest rate is based on individual borrowing, it is best for you to contact your federal loan servicer and discuss your consolidation options with them. They will be able to tell you the rate you would receive and all of the other details involved in federal loan consolidation. You will have all of the same repayment plan options that are available with non-consolidated loans. Keep in mind that once you consolidate your loans, they cannot be separated out again since the other loans no longer exist. For more general information on Federal Direct Consolidation go to the Federal Student Aid site.
PRIVATE LOAN CONSOLIDATION
Private loan consolidation programs vary according to the lender. This means that some lenders will only consolidate your private loans as others may allow you to consolidate both your federal and your private loans. The interest rate is set by the lender and is not the weighted average like federal loan consolidation. Private loan consolidation generally has shorter repayment terms and you’ll want to review your options carefully before signing off on the consolidation. You will lose all of your federal loan benefits such as deferment and forbearance when you choose to consolidate your loan through a private consolidation group. This means that should you be unable to make your monthly payment you would have that benefit to fall back on.
There are some points you’ll want to look into if you are thinking about consolidation and you are interested in LIPP assistance. The consolidation/refinance needs to be specific to your education loans and maintain the basic characteristics of an education loan in order for it to be eligible for LIPP assistance. To ensure your new loan will remain eligible for LIPP you should contact the LIPP office at LIPP@law.harvard.edu prior to initiating the consolidation/refinance. In order to remain LIPP eligible, your new consolidated/refinanced loan must meet the following conditions:
- It must have a repayment term of no less than 10 years
- It must have a fixed interest rate (some consolidation loans offer variable rates which carry substantial risk of significant interest rate increases in the future)
For your own protection, the benefits that you should be most concerned about maintaining are the 10 year repayment term, the ability to pre-pay on your loans, and your forbearance and deferment options. You should be aware that a consolidation will make you ineligible for the Federal Public Interest Loan Forgiveness Program, since only Federal student loans are covered by that program. Additionally, many consolidation or refinance loans do not offer forbearance or deferment options. There is a substantial risk to giving up these options, because you will not be eligible for a temporary suspension of payment should you need one for financial reasons such as unemployment or returning to school. Should you choose to return for a PhD you will not be eligible for LIPP coverage during the first 2 years of your PhD program on any consolidated/refinanced loan which does not have an in-school deferment option; you would need to make arrangements to cover those payments without LIPP assistance.
Dispute and Problem Resolution Contact
The Federal Student Aid (FSA) Ombudsman works with student loan borrowers to resolve loan disputes that the borrower is unable to resolve on their own. Here is how to reach the FSA Ombudsman:
United States Department of Education
FSA Ombudsman Group
P.O. Box 1843
Monticello, KY 42633
phone (877) 557-2575 fax 606-396-4821