I was taking some calls last Friday and noticed a trend. On three separate occasions I had a person call in for a deferment. This part is not unusual. However in these situations after asking some questions I will suggest to these borrowers that they look into the Income Driven Plan.
The reason for this is simple. Let’s take a borrower who wants to apply for the Unemployment Deferment. This borrower has no income and is not married. They can qualify for an Unemployment Deferment (assuming they are registered with an employment agency or receiving benefits) or a $0.00 Income Driven plan.
Here is why the Repayment plan is better. First off it keeps you in repayment which is always a good thing. In addition you are not using up your forbearance and deferment time which will benefit you in the future. Third even though you have a $0.00 payment now when you do get a job, if its not the best job still it will place you on a payment plan based on your income instead of a plan based on fixed formula. Lastly similar to a deferment for the first 3 years any interest that is not paid by your payment will be covered by the government on subsidized loans. So in essence it works just like a deferment but keeps you in repayment!
However what made these three calls fairly frustrating was I could not convince these borrowers they should be on the plan. One said they didn’t want to because they “didn’t have stable income.” Which on a side note is what the income plan is perfect for. We are only supposed to average approximately 6-8 minutes a phone call so if I take the time to explain to you how much better you’d be on the income plan, it’s because I really want what is best for you!
In conclusion the point of this story is to get even one person who doesn’t realize that the payment plan is better than the deferment to learn that and not make the mistake (in my opinion) these three borrowers made. Also if we are doing our job correctly, your servicer will advise you on what is the best move for you so ask questions, make sure you understand your options, and act accordingly. It will often times put you on the best road possible!