Managing Student Loans & Paying Interest

What options are there for managing payments of my federally qualified student loans during my service year?

Historically, it was common practice for individuals engaged in national service to make forbearance requests for federally qualified loans and request that the National Service Trust pay the interest that had accrued on these loans at the year’s end. Now, there are a greater number of options for managing federal loans, including repayment plans options that could amount to $0 monthly payments based on the limited income JV/AmeriCorps members receive. Income-driven repayment plans may be desirable to those actively engaged in national service, because they can work along with the Public Student Loan Forgiveness (PSLF) program.

The PSLF program is intended to encourage individuals to enter and continue to work full-time in public service jobs. Under this program, borrowers may qualify for forgiveness of the remaining balance of their federal Direct Loans after they have made 120 qualifying payments on those loans while employed full time by certain public service employers. Please note: interest still continues to accrue on income-driven repayment plans, and there currently is not the same opportunity available as with forbearance to request the National Service Trust to repay the interested that has accrued during the service year.

For more information about different types of repayment options:

https://studentaid.ed.gov/repay-loans/understand/plans

For more information about public service loan forgiveness:

https://studentaid.ed.gov/repay-loans/forgiveness-cancellation/charts/public-service

What are my options for managing payments on non-federal loans or federal loans that do not qualify for national service forbearance or income-driven repayment plans?

Non-federal (i.e. private loans) have extremely variable options for reduction and postponement of payments for loans based on the policies of the loan servicer. It is important to check in directly with your lender/loan servicer to see what options may be available to you prior to your service year. Upon request, JVC Northwest can write letters to lenders verifying your term of service and your income. JVC Northwest cannot help with student loan payments that may come up in your service year.

It is also important to take into consideration that not all types of federal loans qualify for the same options for forbearance, deferment, and income driven repayment plans. Once again, it is important that you contact your lender/loan servicer to know what options are available to you with your loans prior to beginning your service year. For example, Perkins loans options vary by lender and Parent PLUS loans are federal loans, but they are in parents’ names. Lenders will look at parent borrower’s ability to pay when considering requests for Parent PLUS loans. In other words, your participation in a national service program and limited income will not qualify your parent for a reduction or postponement of payment with your lender.

Who is my lender/loan servicer?

Your lender is the organization that made the loan initially; the lender could be your school; a bank, credit union, or other lending institution; or the U.S. Department of Education. Your loan servicer is the company that collects payments, responds to customer service inquiries, and performs other administrative tasks associated with maintaining a student loan on behalf of a lender. If you’re unsure of who your student loan servicer is, you should contact your financial aid office or, for federal loans, you can look it up in My Federal Student Aid.

Can I get student loan forbearance as an AmeriCorps member?
Individuals in approved AmeriCorps positions are eligible for forbearance for most federally-guaranteed student loans. The Corporation for National and Community Service (CNCS) cannot approve or disapprove forbearance requests. JVC Northwest can only verify that the JV AmeriCorps member is in an approved national service position. Only the loan servicer can determine a person’s loan’s eligibility for forbearance. If a person does receive forbearance, CNCS will pay the accrued interest AFTER the person successfully completes their term of service. If you have student loans, it is important that you check with the lender to see if they will allow forbearance because of national service.

What is the difference between forbearance and deferment?

  • Forbearance – A period during which your monthly loan payments are temporarily suspended or reduced based on certain types of financial hardships. During forbearance, principal payments are postponed but interest continues to accrue. If a person does receive forbearance, AmeriCorps will pay the accrued interest AFTER the person successfully completes their term of service.
  • Deferment – A postponement of payment on a loan that is allowed under certain conditions and during which interest does not accrue on Direct Subsidized Loans, Subsidized Federal Stafford Loans, and Federal Perkins Loans. “Certain conditions” are more specific than those generally required for forbearance.

For more information on federal forbearance and deferment see: http://studentaid.ed.gov/repay-loans/deferment-forbearance

If my lender does grant forbearance, how does this happen?
The accepted JV AmeriCorps member can apply for loan forbearance after they are officially enrolled in the My AmeriCorps Portal online, after the JVC Northwest Orientation in August. Most members apply for forbearance through the My AmeriCorps website.

For more information: http://www.nationalservice.gov/programs/americorps/segal-americorps-education-award/using-your-segal-education-award/postponing

Posted in: 5. AmeriCorps Program FAQs