So what if there isn’t any money to make those payments? You spent it on rent, food, or maybe a few not so hot hands of blackjack. Maybe you don’t have a job. You got hit by a car. Whatever happened, you are having a terrible time and need more time.

Luckily, federal loans can be canceled (although chances are this will have happened before you exit school if it was going to happen at all), deferred, or temporarily postponed (otherwise known as forbearance). State and private lenders can also have these options, but again, they vary from state to state and plan to plan. These options can give you the time you need to make some money and help you avoid becoming delinquent in payments and eventually defaulting. (Oh no! Not defaulting!)

Cancelation

Cancelation can either mean that the rest of the loan was forgiven or you cancel the loan before you get the money.  It gets a little trickier once you’ve spent the money though. Only under certain terms of service and extreme circumstances would you not have to repay the money.

Say in a science project gone awry, a mutant T-Rex, resurrected from some ancient fossils, eats your school, all the buildings except maybe the cafeteria, which he of course coughed up to avoid bad digestion. You don’t have to pay your loans because your school closed (presumably) before you could complete your program.

Maybe you want to teach some hard knock kids in a low-income area for five years. (Well, you might have a very specific life plan in mind or just happen to fall into these requirements.) Then after 120 payments, the rest of your loans, up to $17,500, can be forgiven.

Or maybe you got hit by an asteroid. (Sorry, man!) If you can prove that you are totally and permanently disabled (or dead. For real, you do not have to pay if you die), you can be forgiven the rest of your loan. (Seriously, anyone who gets hit by an asteroid and lived has enough to worry about.)

Deferment

Deferment is basically an extension of time to repay. A deferment can last up to three years. However, during a period of deferment, with the exception of Subsidized Stafford loans, the interest continues to add up. (What is with this interest always adding up?) Deferment gives you a reprieve, but it does not keep the debt from building.

So, let’s say you really do need to keep Uncle Sam from kicking down your door to shake the money out of you. (I hope I’m not giving you nightmares about a patriot in a tall hat who insists rather determinedly to have his money.)  You can defer your loan payments if:

• You are a student, full-time or part-time
• You can’t find a full-time job
• You can demonstrate economic hardship
• You can show that you are called to active duty for the military.

Just remember, the government is like a girlfriend…well, maybe a distant aunt. It wants you to communicate. If you are having problems paying, talk to them. Once you default on a loan, you cannot apply for deferment. (They won’t shun you, but you’ll almost wish they would.)

Forbearance

Bobby works in a small office in New York and gets roosteria. No one knows how it happened.  Just one day, BAM, roosteria. One day, he’s typing memos for the boss man; the next, he’s sprouting feathers and crowing all day long. (None of his co-workers particularly like when he pecks at them either.) Bobby, due to his illness, could apply for forbearance. Forbearance is like deferment, but forbearance is more of a temporary extension. It deals with more immediate problems that arise such as illnesses or financial problems.

Loan holders, not just federal, can be required to grant forbearance for certain requirements like when students have medical / dental internships or residencies, loan payments that exceed 20% of their income, or loan payments being made by the Department of Defense. Forbearance also requires proof of eligibility.

Delinquency

You become delinquent in payments (not as in “Hey, you little delinquents! Get out of my yard!”) once you miss a payment, and you stay delinquent until you catch up. Once you become delinquent in nine payments, you switch to being in default. Delinquency does not have as dire consequences as defaulting, but it does affect your credit score.

Default

Defaulting is when you repeatedly do not repay your loans. (Pizza Hut? Loan payment? Which one will win?) Defaulting should be the Big Momma Worry.  Defaulting can cause the government to take legal action against you. Unlike private lenders, the federal government can take loan payments out of your tax refunds. The government can also garnish your wages, send collectors after you, sue you for the money, and ruin your credit score. So…yeah, they are willing to do everything short of throwing you in debtors’ prison to get their money. (How you supposed to be making that money in prison anyway?)