NCHELP recently published information, which was confirmed by the Department of Education (DOE), that clarifies several aspects of the new hardship deferment regulations. Included in this clarification was the issue of whether a loan with a grace end date post-7-1-09 would automatically go into economic hardship deferment (EHD) status if the borrower had another loan already in deferment prior to 7-1-09. The DOE has now confirmed that loans with a grace end date post-7-1-09 would not be eligible to enter into the same EHD as the other loans.
Unfortunately, this policy is the opposite of what has been the process in the past and what has been our understanding up to this point. Last month we shared a contradictory message with our school partners through the T.H.E. Today and with some T.H.E. borrowers who called our customer service help line. Now that we have clarification from the DOE, however, we want to make sure you have the facts — and that students can make informed choices about their loans entering repayment.
So what does this mean for borrowers? In the simplest terms, borrowers who have loans with a grace end date post-7-1-09 will have to either postpone them separately or enter repayment. We’ll be happy to work directly with your T.H.E. borrowers to find a workable alternative. They can call our loan counselors at 1-866-562-6672.
Included below is NCHELP’s guidance on this issue. For more information about the new EHD requirements, refer to NCHELP’s complete April 27 document, available online at www.nchelp.org/elibrary/index.cfm?parent=61.
From the NCHELP Q&A: Q2. A borrower requests and is eligible for an economic hardship deferment based on the 20/220 criterion on loans that are already in repayment. The deferment period begins prior to July 1, 2009. However, the borrower also has Stafford loans that are in grace. Can the economic hardship deferment be applied to the loans that are in grace once the grace period expires, thereby allowing all of the borrower’s loans to be deferred? The deferment for all loans would expire on the same date – 12 months after the loans in repayment entered the deferment period.
For example, a borrower has both Grad PLUS and Stafford loans. He graduates on May 16, 2009 and opts out of the post-enrollment deferment available for his Grad PLUS loans. Therefore, his Grad PLUS Developed by the NCHELP Program Regulations Committee and Student Loan Servicing Alliance (SLSA) 2 loans automatically move from an in-school deferment to repayment status beginning on May 17, 2009. However, his Stafford loans are eligible for grace through November 15, 2009. The borrower applies and is eligible for an economic hardship deferment based on the 20/220 criteria beginning May 17, 2009. The lender would grant the economic hardship deferment on the Grad PLUS loans from May 17, 2009 through May 16, 2010. Can the lender then apply the deferment to the borrower’s Stafford loans from November 16, 2009 through May 16, 2010?
A2. No. This question was pursued with the Department, and it was confirmed that an economic hardship deferment may not be granted to a borrower based on either the 20/220 or the working less than full-time criteria on loans that have not entered repayment prior to July 1, 2009. One of the underlying requirements for obtaining a deferment is that the loan must be in repayment status, which means any applicable grace period must expire first. In this example, the Stafford loans do not enter repayment (grace does not expire) until November 15, 2009, which is after the trigger date of ‘deferment requests received by the lender on or after July 1, 2009 for deferment periods that begin on or after that date’ for the new economic hardship criteria. Therefore, even though the borrower’s Grad PLUS loans could be deferred based on an 20/220 criterion, the borrower may not be granted an economic hardship deferment based on the 20/220 or working less than full-time criteria on his or her Stafford loans because any deferment period granted on the Stafford loans cannot commence until after July 1, 2009.