While the new eligibility rules make Economic Hardship Deferment an option for more students this year, one change to the program is the loss of the debt-to-income ratio pathway (i.e., Condition 6) as of July 2009.
Here’s how this change will affect students entering residency:
- An average of almost $7,000* of additional interest to repay. After capitalization, that extra interest accrual will end up costing $9,578 on a 10-year term (an additional $80 a month) or $14,442 on a 25-year term (an additional $48 a month).
- A new repayment plan created to help students who no longer qualify for hardship deferment but face a partial financial hardship starts July 1, 2009. This status would require a monthly payment based on household income. Borrowers need to qualify for the income-based repayment plan every year. Currently a $40,000 income will require a $309 payment while $45,000 requires $371.
Residents who no longer qualify for a hardship deferment will have a few options. One of these options is forbearance. The second is qualifying for partial financial hardship and making payments according to the new income-based repayment plan available July 1, 2009. The third is entering repayment and using a payment plan that offers a period of interest-only payments.
*Based on $34,000 in subsidized Stafford loan debt at 6.8% interest.
This article is very informative. Thanks for all you do for our students.