Anyone know the most recent news with the doing away of the 20/220 deferment option?
Economic Hardship Deferment Update
- Thread starter gstrub
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I just applied for mine a couple weeks ago with an effective date of 1-1-08. Went through at Nelnet without a problem.
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Anyone else? Does anyone know if these rule changes will take effect before or after we start residency in June/July for new grads.
Another question. . . When you get a loan deferment, is that valid for the entire 3 years, or do you have to renew it at regular intervals, i.e. annually?
Another question. . . When you get a loan deferment, is that valid for the entire 3 years, or do you have to renew it at regular intervals, i.e. annually?
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It should still be in effect for the start of your residency. They're meeting on it much later in the year to determine what happens after that. Also, you do need to reapply every year.
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No one knows that one. Unless things change, it will be gone by 2010, but it seems possible that things will change -- there's a new bill circulating in the House, and the DOE apparently has the power to extend it if they choose (this is why it's extended right now).
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Even if it is, you can enter forbearance for up to 3 years.
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which screws people over for fellowships now.
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Things to know about deferment (from a lender perspective):
- Our servicer is changing the approval to the 330 rule, allowing more to qualify under these guidelines.
- We are still waiting on the clear understanding whether or not the "debt to income" requirement will remain in tact after 7/1/09 when the Income Based Repayment Plan is available
- Assume the worst - assuming that originally they wanted to remove the debt to income ratio qualifier - apply for deferment early so that you can ideally qualify for longer (pre 7/1/09)
- Forbearance options always available - because lenders are mandated to offer forbearance to resident borrowers, you may not be required to make a payment while in residency, but remember that during forbearance interest starts to accrue on the entire balance (no subsidized benefit)
I hope that helps! Also remember - your "income" can be previous years taxable income - and if you didn't work - that could mean ZERO when you are applying!
- Our servicer is changing the approval to the 330 rule, allowing more to qualify under these guidelines.
- We are still waiting on the clear understanding whether or not the "debt to income" requirement will remain in tact after 7/1/09 when the Income Based Repayment Plan is available
- Assume the worst - assuming that originally they wanted to remove the debt to income ratio qualifier - apply for deferment early so that you can ideally qualify for longer (pre 7/1/09)
- Forbearance options always available - because lenders are mandated to offer forbearance to resident borrowers, you may not be required to make a payment while in residency, but remember that during forbearance interest starts to accrue on the entire balance (no subsidized benefit)
I hope that helps! Also remember - your "income" can be previous years taxable income - and if you didn't work - that could mean ZERO when you are applying!
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for perspective:
In fall 2007 President Bush signed into law new regs for students loans, including economic hardship (what was formerly called the 20/220) rule. However the new regs don't go into effect until July 2009. The new regs will eliminate economic hardship and replace it with an income-based repayment program.
The AMA worked with the Dept of Ed to fill the gap created between fall 2008a and July 2009. From now until 2009 economic hardship is available under more lenient rules than in the past. If you graduate in 2008 or earlier the new worksheet with the new rules is on the AAMC website.
The larger question is, what will happen after July 2009. There are two bills right now, one in the senate and one in the house dealing with this issue. The Dept of ED, the AMA, and lots of parties interested in this issue were meeting this week to determine the future rules, ie will the "income based repayment program" actually go into effect in July 2009. Has anyone heard the outcome.
Summary as I understand it today (this will change....):
- Economic hardship is still available until July 2009
- in order to see if you qualify go to AAMC website for new worksheet, or use an online calculator that is updated with the new requirements
- What will happen in July 2009- unclear?
In fall 2007 President Bush signed into law new regs for students loans, including economic hardship (what was formerly called the 20/220) rule. However the new regs don't go into effect until July 2009. The new regs will eliminate economic hardship and replace it with an income-based repayment program.
The AMA worked with the Dept of Ed to fill the gap created between fall 2008a and July 2009. From now until 2009 economic hardship is available under more lenient rules than in the past. If you graduate in 2008 or earlier the new worksheet with the new rules is on the AAMC website.
The larger question is, what will happen after July 2009. There are two bills right now, one in the senate and one in the house dealing with this issue. The Dept of ED, the AMA, and lots of parties interested in this issue were meeting this week to determine the future rules, ie will the "income based repayment program" actually go into effect in July 2009. Has anyone heard the outcome.
Summary as I understand it today (this will change....):
- Economic hardship is still available until July 2009
- in order to see if you qualify go to AAMC website for new worksheet, or use an online calculator that is updated with the new requirements
- What will happen in July 2009- unclear?
There was an interesting article in the Chronicle that went out to the FA Listserve earlier this week and it does not look promising to keep the eco hardship by extending the 20/220 provison. In short the article outlined the budget projections from the Chief of Forecasting at the fed level which in essence boiled down to a cost of a billion dollars over 10 years to keep the 20/220 rule in place. The advisory panel was told that if a current med grad with $65,000 in debt and a $35,000 in salary received a deferment over 4 years it would cost the taxpayers $4400 in an interest subsidy which just happens to be more than a Pell grant...oops!
The advisory panel by in large concluded that the hardship for doctors was a "temporary" thing and that MD's would go on to make a decent salary and be in a position to repay their debt according to Robert Shireman the head of the Student on Project Debt who concluded the recently introduced income based repayment plan would be fairer to all across the board (especially those remaining in lower paying professions and not those in a temporary situation like MD's).
One would expect there would be an outcry from the FA community (like the last round) or the AAMC but I think after reading the article, it becomes very hard to sell MD's as being destitute for life. I am sure your libraries have a subscription to the Chronicle that you can access remotely on line (it's a weekly paper) or ask for it to be copied and sent to you and I encourage you to read it yourself. Your FA Office was most likely sent a copy by the listserve and may have it on hand. The article was written by Paul Basken.
The advisory panel by in large concluded that the hardship for doctors was a "temporary" thing and that MD's would go on to make a decent salary and be in a position to repay their debt according to Robert Shireman the head of the Student on Project Debt who concluded the recently introduced income based repayment plan would be fairer to all across the board (especially those remaining in lower paying professions and not those in a temporary situation like MD's).
One would expect there would be an outcry from the FA community (like the last round) or the AAMC but I think after reading the article, it becomes very hard to sell MD's as being destitute for life. I am sure your libraries have a subscription to the Chronicle that you can access remotely on line (it's a weekly paper) or ask for it to be copied and sent to you and I encourage you to read it yourself. Your FA Office was most likely sent a copy by the listserve and may have it on hand. The article was written by Paul Basken.
