Forbearance
If you have federal student loans, you might be eligible to get all or part of the interest paid while you serve. What that means is not only will you not have to make payments on your loan(s) while you serve but also after you finish service your loan balance ideally will return to the amount it was on the day you enrolled as a member.
Forbearance means that you neither make payments nor pay interest on your loan(s) over a specified period.
It sounds like a great deal, and it is! This is especially true if you are carrying a high student loan balance. If your balance is high enough, the amount of interest paid on your loan after you complete service might exceed the value of your education award! A few aspects of national service forbearance are tricky. We'll go through them step by step.
What kind of loans qualify?
In order to put your loans into forbearance through national service, you need to have federally-backed student loans. However, there are a few exceptions.
PLUS loans are federal loans taken out in a parent's name to pay for a child's education. If you have PLUS loans, you can neither put them into forbearance nor pay them down with your education award.
Federal Perkins loans are also not eligible for national service forbearance. Fortunately, though, many educational institutions will use their discretion which is allowed under federal regulations to grant forbearance for Perkins loans. (If you are unable to put your loans into national service forbearance, there are options for you listed later on this page.)
Click here if you have student loans from Alaska.
Here also is a legal disclaimer from CNCS: The National Service Trust can certify your AmeriCorps or VISTA status, but only the loan holder can determine your eligibility for forbearance. Contact your loan holder if you haven't heard from them within four weeks of submitting your information to the Trust.
What's the process?
You can request forbearance from the school or loan company that holds your loan through your My AmeriCorps account. If you're enrolled in service and don't have an account, you can sign up here. You can find the form by clicking on the "forbearance request" link on the left side of the screen.
When you log on, here's the information you'll need to fill in the forbearance request form: The name of the lending school or institution, the city, state, and zip code. If you have more than one lender, fill out the form for each of them.
What happens next?
You should receive notification of your forbearance within a few weeks from your lender(s) and that you do not need to make payments while you remain in service.
Over your term, the interest on your loan will continue to grow. The National Service Trust will pay off the interest that accumulated once you complete all phases of your service.
Then what happens?
After you have finished your term, completed the exit paperwork, and your program has submitted the paperwork to CNCS, go back to your My AmeriCorps account. This time click on the "interest accrual request" link on the left side of the screen.
Again, you will need the fill in the name of the lending school or institution, the city, state, and zip code. If you have multiple lenders, you will need to repeat the process.
Within a few weeks, CNCS will send funds to your lender to cover all or part of the interest that gathered while you were serving. Your loan balance ideally will return to the amount it was on the day you began your term.
Notes
- The interest that CNCS pays on your student loan is taxable income. The amount in taxes is substantially less than the amount of the interest CNCS pays for you, but you are required to pay it.
- If you are a VISTA not electing to receive the education award, you are not eligible for national service forbearance. You may have other deferment options discussed below.
- CNCS will NOT pay interest on loans if you fail to complete your term of service. Exceptions will be made only for compelling personal reasons. It's up to your individual program to determine those circumstances.
What are the alternatives to forbearance?
The federal government has several programs open to low-income people to assist them with repaying federal student loans. Examples of these programs include Income Sensitive Repayment (ISR) and Income Contingent Repayment (ICR) repayment plans. A new program called Income Based Repayment (IBR) will be available in July 2009.
Click here for a special option for VISTA members with Perkins loans.
What if I have private loans?
Private student loans are not eligible for the national service forbearance. Nor are they eligible for other federally backed deferment programs such as the ones discussed above. Private loans are offered when students cannot borrow enough through federal programs to cover their school expenses. While the applications may look them look like federal student loans, they have more in common with a bank-issued credit card.
Can I get forbearance if my loans are in default?
Most student loans that are in default are not eligible for forbearance. If you have loans that have gone into default before you began your service, you can attempt to negotiate an arrangement with the loan holder (or collection agency) to bring the loan out of default so forbearance can be granted and interest paid.
