Stafford Student Loan News

As the economy continues to spiral downward at a faster rate than mighty Titanic it ’s not surprising to hear that students can not make their payments.  My friend Melody is a recent college graduate and has $40,000 in student loans from Northeastern.  She has been unable to land a job since she graduated in May.  With her six month grace period about to expire she asked me, what do I do?  After telling her to take a deep breath I advised her to request a deferment from her lender.

Stafford loans hold up to three years worth of deferment time.  You can place your loans in either an economic hardship deferment or a forbearance.  The big difference between the two is that if you qualify for a deferment no interest accrues on the subsidized portion of your loans.  In a forbearance status interest accrues on the entire amount.

How do I qualify for deferment?

1. enrollment in school at least half-time as defined by your school (this is not counted against your three years)

2. inability to find full-time employment (up to three years)

3. economic hardship (up to three years)

With Stafford loan funds capped (yearly allotments) I’ve discovered more and more students using credit cards to pay for their education. Part of the problem is while they are in school it is difficult to keep up with those payments.

Here is a pop quiz for you: What do credit card debt and blood pressure have in common in 2008? Give up? They’re both rising like Grandma’s warm, crisp bread in the oven. Delinquencies continue to escalate in the credit card market and the economy continues to spiral, but help is on the way.

It wasn’t very long ago that aggressive collection tactics were employed to chase down past due funds. Some folks would get upwards of six calls per day, and it made answering the phone a stressful task. Now banks are working with borrowers in a more proactive, constructive way. I guess the old adage you catch more flies with honey is the new school of thought as banks look to shore up their balance sheets.

According to the American Bankers Association the percentage of bank credit-card accounts that are delinquent rose to 4.51% in the first quarter up from 4.41% year over year. That may not seem like a large increase but that equates to millions of dollars in lost revenue.

The good news for you is that lenders nowadays are more willing to make a deal. American Express plans to customize payment plans to borrowers facing temporary financial hardship. Bank of America is accelerating their efforts to reach customers earlier and will consider waiving fees and reducing interest rates. Citigroup is expanding their forbearance program to early stage delinquent customers. Capital One, Discover, J.P. Morgan Chase, and Washington Mutual also are employing similar programs.

If you’re struggling with credit card debt give your credit card company a call and see what they can do for you. Many are willing to play ball, so get off the bench and get into the game!