Loans Used to Finance Education

Online, May 5, 2010 (Newswire.com) - More and more students are defaulting on their federally guaranteed student loans.

According to new numbers from the U.S. Department of Education, default rates for federally guaranteed student loans are expected to reach 6.9% for fiscal year 2007. That's up from 4.6% two years earlier and would be the highest rate since 1998.

Borrowers having trouble repaying their federally backed loans can call their lender or can visit www.federalstudentaid.ed.gov to request that their payments be put on hold until they get back on their feet. Most types of federal loans qualify for "forbearance" -- meaning the borrower can suspend payments temporarily but is still on the hook for the interest that continues to build while payments are on hold, which is then spread out over the life of the loan.

Certain need-based student loans qualify for something called a "deferment," in which case the government will pay the interest payments for the period of time the student cannot pay. Deferments and forbearances can each be used only for a maximum of three years for each loan.

Private loan borrowers and students who funded their education using personal loans have fewer options. As more and more borrowers have had trouble repaying their loans, lenders have become stricter and granted fewer forbearances. Some major lenders, such as Wells Fargo & Co., Sallie Mae and the nonprofit Vermont Student Assistance Corp., have said they are granting more as graduates have struggled during the recession of the past two years.

For help finding out who to contact about loan deferments, borrowers may access the web site www.nslds.ed.gov or can contact the Federal Student Aid Information Center at 1-800-4-FED-AID (1-800-433-3243).

Find out how you can get a personal loan up to $250,000.