Student Loan Law: 4.3.5.3 Unemployment Deferments
There are two ways to qualify for an unemployment deferment.
There are two ways to qualify for an unemployment deferment.
The 2005 Deficit Reduction Act included a military deferment for all three loan programs—FFEL, Direct Loan, and Perkins Loan.80 The deferment applies to periods during which the borrower is serving on active duty during a war or other military operation, serving during a national emergency, or performing qualifying National Guard duty during a war or other military operation or national emergency.81
The College Cost Reduction and Access Act of 2007 included a deferment for members of the National Guard or other reserve components of the Armed Forces or members of such forces in retired status.89 This deferment is available for FFEL, Direct Loan, and Perkins Loan borrowers.90 The deferment is available to borrowers who were serving on active duty on October 1, 2007, or began serving on or after that date.91
The Department of Defense and Labor, Health and Human Services, and Education Appropriations Act, 2019 and Continuing Appropriations Act, 2019 included a cancer deferment for all three loan student loan programs—FFEL, Direct Loan, and Perkins Loan.101
FFEL and Direct PLUS Loan borrowers are generally eligible for the same deferments as other borrowers. The borrower must qualify for the deferment. If the loan is a parent PLUS loan, the parent borrower must qualify for the deferment. Because PLUS loans are unsubsidized, interest will accrue during the deferment period.
Borrowers are entitled to defer Perkins Loan principal payments without accruing interest under certain situations. As with FFEL Program loans, the specific qualifying circumstances depend on when the loan was made. For Perkins Loans made after July 1, 1993, deferments are available based on a number of grounds, including:
Under the Direct Loan Program regulations, a borrower has the right to cancel a deferment and resume payment.133 The FFEL regulations explicitly give this right only to borrowers who are responsible for interest accruing during the deferment.134 However, there is also no FFEL provision preventing other borrowers from cancelling a deferment.135 Some FFEL Program loan holders have interpreted the regulations to require that they maintain the de
Forbearances may be granted under certain circumstances without written documentation or written application, meaning that borrowers can often obtain a forbearance over the phone.
Borrowers who are more than 270 days delinquent are technically in default. However, if the Department has not transferred the loans to collections (for Direct Loans)—or if the guaranty agency has not paid a default claim (for FFEL Program loans)—then borrowers can use a forbearance to eliminate the default or reduce the amount of the delinquency.166 This can be an incredibly valuable way to help borrowers unwind a recent default and avoid the harshest consequences of default.
There are general eligibility criteria that apply to most federal student loan programs. In some cases, students must show financial need. The Expected Family Contribution (EFC) is a measure of the borrower’s family’s financial situation and indicates how much of the borrower’s (and family’s, if the borrower is a dependent) resources should be available to help pay for education.
In general, a borrower’s responses on the application for federal assistance will determine whether they are considered dependent or independent. The main difference is that dependents must also report their parents’ income and assets, and parents of dependent students are expected to contribute to their children’s education.
A borrower is considered independent if the borrower:
Individuals must be United States citizens or eligible non-citizens to be eligible to take out federal student loans.32 Eligible non-citizens primarily include permanent residents, refugees, and asylees.33 Victims of human trafficking have the same eligibility for federal benefits as refugees. In addition, immigrants who are victims of domestic violence by their U.S.
Until very recently, federal law made students ineligible for federal student aid if they had certain drug convictions.43 However, these restrictions were fully eliminated as part of the FAFSA Simplification Act.44 The Department of Education implemented the provisions of the Act eliminating drug convictions as a barrier to federal student aid eligibility early.45 Beginning with the 2021–2022 award year, drug convictions are no longer a barrier to
Students are not eligible for federal student loans while they are incarcerated, but they may be eligible for Pell Grants.51
Students are generally not eligible for federal student aid if they are in default on federal student loans or if they owe overpayments on federal grants or loans.61 As discussed in § 7.6, infra, borrowers with loans in default have options available to restore their eligibility for federal student aid.
Only students who are enrolled at an “eligible institution” may receive federal aid.63 To be eligible, all institutions must:
Because a school’s eligibility does not necessarily extend to all its programs, the school must ensure that a program is eligible before awarding federal aid funds to students in that program. The school is responsible for determining that a program is eligible. For example, the program must be included in the notice of accreditation and must be authorized by the appropriate state to offer the program.
Distance education has long been a part of the higher education landscape in the United States. These programs have proliferated as online education has become more ubiquitous.89 “Distance education” is generally defined as education that uses one or more of the following technologies to deliver instruction to students who are separated from the instructor and to support regular and substantive interaction between the students and the instructor, either synchronously or asynchronously. The technologies may include:
The Department will capitalize unpaid interest in certain circumstances. For example, the Department will capitalize interest that accrues on unsubsidized loans during deferment or forbearance periods.
Schools must provide an array of information to any current or prospective students that request it, including information about:107
Limits on Direct Stafford Loans vary depending on whether the borrower is financially dependent or independent. If a borrower is considered dependent, the borrower’s parents’—and the borrower’s—income and assets will be considered in determining the level of financial aid.122
Perkins Loans stopped being disbursed in 2018 and are discussed generally at § 1.4.1.4, supra. However, the annual Perkins limit for undergraduates was $5500.