SOURCE: NextStudent

October 15, 2007 11:46 ET

NextStudent Encourages Student Loan Borrowers to Take Advantage of Deferment and Forbearance Benefits to Avoid Defaulting on Student Loans, Damaging Credit Score

PHOENIX, AZ--(Marketwire - October 15, 2007) - Student loan borrowers, whether they're just out of college or long-time graduates, may find it difficult at one time or another to meet the monthly payments on their student loans. Things like a lower-than-expected entry-level salary, a company layoff, unexpected medical expenses or a new baby could throw a borrower's budget and student loan repayment plan off-balance. NextStudent, a leading Phoenix-based education funding company, urges borrowers who may find themselves having trouble making their student loan payments to contact their lenders about their deferment and forbearance options before they begin missing payments, which could jeopardize their credit score and put them at risk of defaulting on their student loans.

Besides the damage it does to their credit report, which could take years to repair, having a defaulted student loan could keep borrowers from being able to borrow any other money, whether for a new car, a home or another semester at school. If borrowers default on a federal student loan, the government can even decide to garnish their wages.

Deferments and forbearances allow borrowers to temporarily reduce or postpone their student loan payments without compromising their credit score or defaulting on their student loans. Most federal student loans (including Perkins loans, Stafford loans, PLUS loans, Grad PLUS loans, and Student loan consolidations) are eligible for these benefits. Some private student loans may also offer deferment or forbearance periods -- borrowers should contact their private student loan lender.

Deferment allows borrowers to temporarily stop making payments on their student loans. Borrowers can request an in-school deferment on their federal student loans if they're enrolled in school at least half time. If they're unemployed, experiencing economic hardship, or if they're in the military and have been deployed, borrowers may request a deferment, for up to a year at a time, up to a total of three years over the life of the student loan.

Forbearance allows borrowers to temporarily reduce or postpone payments on their student loans. Generally, a lender can grant a forbearance for up to a year at a time. Unlike unemployment or economic hardship deferments, there is no three-year cumulative limit on discretionary forbearance periods granted due to financial hardship.

Borrowers should keep in mind that interest charges continue to accrue on their student loans even while they're in deferment or forbearance. The government will pay the interest on subsidized loans in deferment, but borrowers will be responsible for the interest on their unsubsidized loans in deferment and on any student loans, whether subsidized or unsubsidized, in forbearance. Any unpaid interest that accrues during a deferment or forbearance period will be capitalized and added to the principal loan balance for the borrower to repay once repayment resumes. Borrowers may always elect to make interest payments during deferment or forbearance periods in which their payments are postponed in order to avoid having accrued interest added to their principal loan balance.

NextStudent reminds borrowers who are considering a deferment or forbearance to contact their lender. Deferments and discretionary forbearances are not automatic. Borrowers may be required to complete a deferment or forbearance request form and submit supporting documentation.

About NextStudent

NextStudent, Federal Lender Code 834051, is dedicated to helping students and their families find affordable ways to pay for college. NextStudent offers one-on-one education finance counseling and has a portfolio of highly competitive education finance products and services, including a free online scholarship search engine, federally guaranteed parent and student loans, private student loans, both federal and private student loan consolidation programs, and college savings plans.

The NextStudent Scholarship Search Engine, one of the nation's oldest and largest scholarship search engines, is updated daily, available free of charge, completely private -- and represents 5.9 million scholarships worth $16 billion.

For more information about NextStudent and its student loan programs, please visit our website at www.nextstudent.com.

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