There are many names for the process of reducing a portion or all of your student loan debt due to some extenuating circumstances: cancellation, deferment, dischargement, forbearance or forgiveness. There are subtle differences in the details of the processes – Deferment and Forbearance are temporary postponements of your repayment schedule; Cancellation, Dischargement and Forgiveness remove your entire debt permanently.
If you are having problems repaying your loan, then contact the organization servicing the loan before late fees are assessed. You might qualify for deferment or forbearance.
Deferment – This is a temporary suspension of loan payments due to specific reasons, like re-enrollment, unemployment, bankruptcy or economic hardship. Deferment can be made up to three years. If you have a subsidized loan, you don’t need to pay interest during deferment. If you have an unsubsidized loan, you do need to pay interest during deferment; unpaid interest will be “capitalized” – added to the principal balance.
Forbearance – This temporary postponement or reduction of payments due to financial difficulty is a possibility for those who don’t qualify for deferment. Applications must be made to the loan servicer. Interest continue to accrue on the unpaid principal. The student must repay the full balance. Forbearance is permitted for a period of up to one year with a maximum of 3 years.
The College Cost Reduction and Access Act of 2007 has assisted government employees with student loans by providing forgiveness after 10 years of service. Active duty military can get loan deferment. Some special education, science and mathematics teachers might have their loans forgiven.