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FIRST for Residents Mailbox Archive
October 2008
Economic Hardship Deferment
This message from the FIRST for Residents Mailbox serves as a reminder
to all residents: It may be time to apply for Economic Hardship Deferment
on some or all of your federal student loans.
Be Advised: Do not allow the Grace period OR your current Economic
Hardship Deferment to expire without having another deferment in place.
This may cause early capitalization - making the loans more expensive.
Filing late for a deferment may also lead to required payments that you
have not budgeted for. The best way to avoid this is to submit your application
for Economic Hardship Deferment within 30-days prior to the date you will
actually need it - this should allow for sufficient processing time by
your lender(s). Continue reading for more details.
Is deferment going away? As you may have heard, Economic Hardship
Deferment eligibility criteria is currently scheduled to change on July
1, 2009, making it more difficult for medical residents to qualify. The
key to obtaining another full year, prior to this change is to have an
application in and processed by your lender(s) shortly before July 1,
2009 - this will allow you to obtain another full (and final) year of
Economic Hardship Deferment.
The following are possible steps to consider in order to maximize the
availability of Economic Hardship Deferment:
- Contact your servicer and ask how you might maximize your eligibility
for Economic Hardship Deferment. Economic Hardship Deferments are typically
granted in annual increments. However, depending on your servicer, you
may be able to request that your current or next Economic Hardship Deferment
period be shortened. It should be scheduled to end on or near June 1,
2009 - this allows for sufficient time to process a final deferment
request prior to the changes taking effect.
- If your Economic Hardship Deferment is scheduled to end on or near
June 1, 2009, then you MUST make sure to apply for another annual increment
BEFORE that date to avoid any capitalization or monthly payments.
- Follow-up with your servicer to ensure that that your application
is received and processed.
Remember, in order to be eligible for another year, you must not only
meet the financial qualifications, but you must also have your new application
submitted to the lender prior to July 1, 2009. For specific questions
about your loans, contact your lender(s) or servicer(s). They can advise
you on the status of your loans, the application process and any eligibility
questions you may have.
General questions can be submitted to FIRSTforResidents@AAMCINFO.AAMC.ORG
June 2008
Interest Rates Change
On July 1, 2008, the variable interest rates on federal student loans
are scheduled to reset—lower by slightly more than 3 percentage points.
This decline will impact only those loans that have not been
consolidated and that were disbursed prior to July 1, 2006.
This rate change will not affect private student loans or fixed rate
federal loans (such as consolidation loans, Grad PLUS loans and recent
Stafford loans). Therefore, if all of your federal loans are already at
a fixed rate, this rate change will not impact you as there is no way
to "refinance" a fixed rate federal student loan into a lower
interest rate.
Loans Possibly Affected:
- Subsidized and Unsubsidized Stafford loans (disbursed prior to July
1, 2006)
- Parent PLUS loans (disbursed prior to July 1, 2006)
Rate change:
- Stafford loans—from 6.62% to 3.61% (In-school/Grace/Deferment
periods)
- Stafford loans—from 7.22% to 4.21% (Forbearance/Repayment periods)
- Parent PLUS loans—from 8.02% to 5.01%
Should you consolidate?
To consolidate or not is a personal decision based on an individual's
financial goals. In light of the impending rate drop, the primary reason
to consolidate would be to protect variable rate loans from future rate
hikes.
Some advice to consider before making a decision about consolidation
includes:
- Do NOT consolidate before July 1st, 2008 as rates do not decline until
this date.
- Do NOT "re-consolidate" loans that have already been consolidated.
- Additional consolidation of these loans will NOT reduce the rate,
but may actually cause the interest rate to be increased.
- Consider consolidating only variable rate loans and not
including any fixed rate loans into the consolidation as the new fixed
rate will be rounded up to the nearest 1/8th.The rates discussed above
will be in effect July 1, 2008 thru June 30, 2009. You may want to consider
waiting until 2009 to see the impact of next year's rate reset before
deciding to consolidate.
- Consolidation can increase the cost of the loan by lengthening the
term of the loan. Be aware of the impact of consolidation and manage
your repayment wisely.
Questions
For detailed questions, contact your lender or servicer to learn if/how
this rate change will affect you and what your options are. Submit your
general questions to the FIRST for Residents Mailbox.
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