Question

Write a Formal Email Persuading a Lender to Defer Paying a Student Loan (LO 2-2)

Many college graduates today leave school with large debts from student loans. Though the loans must be repaid, the time to do so and the monthly payment are determined by the lender. With a touch economy making it harder to find a job, students may also find it harder to repay loans. Many lenders, however, expect them to start doing so upon graduation. You plan to request a deferral to start paying back your loan.

To do so, answer the following questions about your audience:

• What is at stake for the lender if it defers the loan?

• What regulating bodies (e.g., state and federal government) govern how a lender may alter the terms of a loan agreement?

• What objections might a lender raise to deferring the loan?

• What other resources might the lender suggest tapping in order to repay the loan?

• What might the lender expect from you as a guarantee that you will repay the loan after the deferral?

• What channel is the best way to reach the lender?

• What tone will work best in the message to the lender?

• How long of a deferral are you requesting?

Answer 1

Let's first understand that lender lends loan considering a risk and feasibility of project. It charges interest on loan disbursed based on the risk and ability of borrower to repay it in set time frame. In case of education loan, there are two types of loans, federal and private. federal student loan borrower has multiple repayment options. But in case of private loan borrower may have limited repayment options. So while selecting loan option, a student should consider some factors into account like, availability of jobs in his education stream, pay offered in the job, possible financial growth in the job, etc.

Here in given case, students who failed to repay loan in time are looking for defferal option. It depends on the lender if you are eligible for the deferment. In case of deferment, borrower may get a relaxation of certain period to pay interest and principal but it may cost him more interest too as inability of repayment is increasing the risk of the lenders and higher interest is charged to higher risk. In a case of federal loan, interest during defferd period may not be acrued but private lender may do so.

As the federal government's role in the student loan industry has expanded over time, the United States has contracted with student loan servicers to help it administer its growing student loan portfolio. These servicers perform a variety of functions, including (1) communicating with borrowers regarding repayment; (2) disclosing information about student loan terms to borrowers; (3) applying payments to outstanding loan balances; (4) processing applications for enrollment in repayment plans; and (5) processing requests for loan forbearance and deferment. Several federal statutes and regulations—along with an array of contractual provisions—may affect how these servicers conduct these various functions on the government's behalf with respect to federal student loans.

A variety of federal statutes and regulations—as well as contractual provisions—bear on the servicing of federal student loans.

1. One such statute is Title IV of the Higher Education Act of 1965 (HEA), which establishes programs to provide financial assistance to postsecondary students. Title IV also governs loans issued under the now-discontinued FFELP that remain outstanding.

2. ED has promulgated several servicing-related regulations under its rulemaking authority under Title IV of the HEA. Nearly all of these regulations are codified in Code of Federal Regulations, which governs FFELP loans rather than FDLP loans. For instance, contemplates that an FFELP lender "may contract or otherwise delegate the performance of its functions under" governing federal law "to a servicing agency," but emphasizes that doing so "does not relieve the lender of its duty to comply with" all applicable statutes and regulations. It in turn prescribes actions that a servicer must take when servicing an FFELP loan, including "responding to borrower inquiries, establishing the terms of repayment, and reporting a borrower's enrollment and loan status information." Similarly,it also establishes administrative responsibility and financial responsibility standards that third-party servicers of FFELP loans must satisfy. In addition it also imposes auditing requirements on servicers of FFELP loans.

While deffering loan lender may ask you to give a guarantee of parents or third party. It may also ask yu for any collateral security. To get a deferment of loan, you better reach the lender in person and let your lender know the core reason for inability for repayment. Lender can guide you better repayment plan.