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FAQ: Reduced Payment Forbearance

July 12, 2012

As a Direct Loan servicer, Nelnet’s Partner Solutions team receives questions from the school financial aid and borrower community on a regular basis. In an effort to share the information and educate our school partners, we are posting to our blog some of the more relevant and well-timed questions that we receive.

Q: How can I distinguish a Reduced Payment Forbearance from a regular forbearance on my Nsight reports?

A: For a Reduced Payment Forbearance, there will be a status of Forbearance in the Repayment Plan field on your Nsight report and a Next Payment Due Date set for the following month. A regular forbearance will not have a payment due during the time of the forbearance.

The Reduced Payment Forbearance does not count toward the forbearance cap. When a borrower has a Reduced Payment Forbearance and does not make those payments, the loan will become delinquent. You will see this loan on Nsight in a status of Forbearance and as a past due loan.

Q: Where will we find loans in a Forbearance status that are also delinquent?

A: A borrower will only be in forbearance and delinquent if the borrower has a Reduced Payment Forbearance and does not honor his or her repayment obligation. In most circumstances with this forbearance, the borrower remains current by continuing to make monthly payments at a lower amount or paying interest only.

Q: Are there any plans to create a new code to distinguish Reduced Payment Forbearances?

A: As of now, we have no plans to create a new code. However, we are looking for a better way to flag Reduced Payment Forbearances.

Q: What is Nelnet’s process for handling Reduced Payment Forbearances?

A: Borrowers may verbally request a Reduced Payment Forbearance. The loan is then treated as though it is in a repayment status; however, the borrower is allowed to make a lower payment amount that at least covers the interest.

Q: How long can a borrower have a Reduced Payment Forbearance?

A: Reduced Payment Forbearances are applied for 12 months; however, the borrower can cancel at any time. Once the 12-month period is complete or the borrower cancels the Reduced Payment Forbearance, the loan will move back into a repayment status that uses the repayment plan that was in effect prior to the application of the Reduced Payment Forbearance. In Nsight, the loan will change from Forbearance status to Repayment status in the Loan Status Group field.

Do you have any servicing-related questions? Please let us know so we can help you and others in the school community who may be wondering the same thing.

Dawn Knight, Director, Nelnet Partner Solutions

8 Comments leave one →
  1. Dmitri permalink
    December 13, 2012 3:36 pm

    If I were to go into a reduced payment forbearance will this affect my chances for applying to any other type of loan?

    • December 13, 2012 5:06 pm

      Thanks Dmitri for asking the question. This will not impact getting future loans. As always, it is good to double check with your financial aid office on campus to see if your file is complete with their office. They usually will let you know if you need to do anything. Best of luck with your studies.

      Jim

  2. Jax permalink
    January 24, 2013 11:09 pm

    I had my loan through one service provider who offered RPF, but then the loan got transferred to another service provider. The new provider denies ever hearing about or having any knowledge of such a program and told me that the loan transfered to them in regular forbearance status, therefore I had no more forebearances left for the life of the loan. They told me I need to provide them with information about this program to them to prove that I did not use up my general forbearance. Where can I find such information? I tried looking at the DL web site and I dont see anything. I know thats what I had, but the lady was making me feel like I was crazy. Thanks!

    • January 24, 2013 11:21 pm

      Jax,

      There are a lot of different kind of repayment plans. Is Nelnet your current servicer? If so, you can shoot me an email with your contact info and we can try to look up your account and I will have someone get in touch with you so we can get you all set. There are certainly federal rules and guidelines we have to follow…but let us check.

      Just don’t share any personal information over the blog. My email is james.harris@nelnet.net. Just your name and a good phone number and we will see what we can do.

      Thanks for putting a message on the blog, Jax.

      Jim

  3. Wilma Hutcherson permalink
    January 30, 2013 10:47 pm

    My son tried to get loan modification and after 7 months of being told several different stories, then say he can not get it because his house is a FHA loan . Really? 7 months when they should have known that 7 months ago. He was given a forebearance that raised monthly pmt by $150.00 and wants him go pay this for 77 months. If he was struggling with his old pmt, how can he afford this? He will be paying over $100,000 in 77 months. His mortgage is only for $130,000 for 30 years. Seems like his mortgage holder is trying to set him up for failure. Any suggestions?

    • January 30, 2013 11:27 pm

      Wilma,

      We are a student loan servicing company, I really don’t have any information on mortgage loans. As just a humble citizen that has his own mortgage loan, I would try to refinance my loan with another company or at least speak to another bank or mortgage company to see if you are getting consistent information. Again, I am no expert…just what I would do personally. Best of luck to your son and sorry I can’t give any official advice in this area

      Jim

  4. Valeria permalink
    September 12, 2013 10:37 am

    Jim,

    Other than paying only the interest (typically) on the loan, what are some down sides to the reduced payment forbearance plan? Does it negatively impact my credit? The word “forbearance” is just so scary… Do people in the industry, i.e. other lenders, banks, and the like understand the concept?

    The RPF is currently looking very attractive for my situation because I don’t have a set monthly income but I feel confident I can at least pay off the minimum (in my case, interest-only amount) and then using whatever extra cash I have left over monthly to target the higher-interest, larger amount loans.

    If you could comment on any pitfalls/negatives, I would greatly appreciate it. Thanks!

    Best,
    Valeria

    • September 12, 2013 10:13 pm

      Valeria,

      This is a great question. I would like to have us contact you and listen to your particular circumstances. We can help you find what works best for you. I don’t think you have to worry about credit hits…however, there is a lot to think about.

      I am going to have someone reach out to you and see what works best for your needs. There are so many options that we can use to help you. Since this is a public blog, I am going to have folks contact “off line” if you don’t mind.

      Thanks for reading the blog and reaching out with some very good questions.

      Jim

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