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I was wondering if anyone has any thoughts about my situation...I graduated in 1998, and went on within 4 months to a graduate fellowship. I have been doing this fellowship for the past 3 years, and defering my loans. The fellowship and the deferment are over at the end of this month. Since a graduate fellowship is considered an in-school deferment, I was under the impression that I would receive a 6 month grace period after the fellowship was over. But my loan company is saying no, that my grace period was used up after I graduated with a degree and I am not entitled to a grace period even though as a graduate fellow I am considered a student. A grace period ends up being important because it will give me some time to consolidate my loans at a lower rate and apparently if you consolidate in a grace period the interest rates drop another .6%. What makes this disturbing is that this whole grace period thing seems like it is subject to interpretation by the loan companies as several people I know (who are also graduate fellows)are getting a grace period after their fellowship.

Has anyone else dealt with this and have any suggestions about how to handle this?
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Since a graduate fellowship is considered an in-school deferment, I was under the impression that I would receive a 6 month grace period after the fellowship was over.

One would think so, but you'd have to read all of the fine print for all of your loans to be sure. Here's what I would do:

Who has been signing your in-school deferments up until now? I am guessing it is the financial aid office at the shcool you attended. Go get in-school deferment forms for all your loans (should be available on-line). Go to the finanical aid office and get them to sign in-school deferments dated through to the end of your fellowship for each one of your loans. Make copies of the in-school deferments (for yourself) and send the original to your lender.

I can't guarantee this will work, but there's a decent chance it will. I am guessing that when ask the lender: "Do I still have an additional grace period?" the answer is "No" because they want to get you into repayment. However, if the correct papers are filed, they have no choice but to follow the rules.

Good luck,
NellieD
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I was wondering if anyone has any thoughts about my situation...I graduated in 1998, and went on within 4 months to a graduate fellowship. I have been doing this fellowship for the past 3 years, and defering my loans. The fellowship and the deferment are over at the end of this month. Since a graduate fellowship is considered an in-school deferment, I was under the impression that I would receive a 6 month grace period after the fellowship was over. But my loan company is saying no, that my grace period was used up after I graduated with a degree and I am not entitled to a grace period even though as a graduate fellow I am considered a student. A grace period ends up being important because it will give me some time to consolidate my loans at a lower rate and apparently if you consolidate in a grace period the interest rates drop another .6%. What makes this disturbing is that this whole grace period thing seems like it is subject to interpretation by the loan companies as several people I know (who are also graduate fellows)are getting a grace period after their fellowship.

This is a Higher Education Act (HEA) question. It sounds like your lender is trying to treat the last three years as an out-of-school deferment situation, when it sounds more like an in-school one. I think the rule is that everyone is entitled to the 6-month grace period after they complete the in-school period.

Stafford Loans are under the HEA and are an "entitlement"--there is no option on the lender if it cares to acknowledge a grace period or not.

You would only get the 60 basis point favorable rate if your loans originated sometime after 7/1/1995 I think. (A period of t-bill plus 250 in-school and t-bill plus 310 out.) It sounds like you began to early to have these as t-bill + 170 and + 230. If your loans are earlier than 1995, chances are there is no "grace period differential" and in-school and out-of-school rates are t-bill plus 310. So you might be getting worked up about nothing over the rates, and the real issue is how much deferment time you get.

If you chose to consolidate these loans with Direct starting next week, I am sure someone there could help determine what the real interest rate you should be charged is. However, if you consolidated before the grace period you should otherwise have is up, that's it. The benefit of going in now, of course, is the 80 basis point "timely payer" discount everyone has been talking about. This discount may still be around after September 30---its scheduled end date--but no one knows for sure, and many of us are taking the "bird-in-the-hand" approach.

You would have to do the math whether locking in a relatively low rate is worth giving up potentially six months extra deferment (especially if it's subsidized deferment.) Usually, (believe it or not,) the lower rates win out when the math is done.



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OK back at'cha: This is from the Higher Education Act (Title 20, U.S. Code). There is actually a whole section on what the lender must provide in the loan in order for the government to insure it.

This is the whole damn section. I'm putting it here cause for those who really like to read.

There are two parts of this that might be relevant to the graduate-deferment issue, and I have bold and italicized them.


<<Sec. 1077. Eligibility of student borrowers and terms of federally insured student loans

(a) List of requirements
Except as provided in section 1078-3 of this title, a loan by an eligible lender shall be insurable by the Secretary under the provisions of this part only if -
(1) made to a student who (A) is an eligible student under
section 1091 of this title, (B) has agreed to notify promptly the
holder of the loan concerning any change of address, and (C) is
carrying at least one-half the normal full-time academic workload
for the course of study the student is pursuing (as determined by
the institution); and
(2) evidenced by a note or other written agreement which -
(A) is made without security and without endorsement;
(B) provides for repayment (except as provided in subsection
(c) of this section) of the principal amount of the loan in
installments over a period of not less than 5 years (unless
sooner repaid or unless the student, during the 6 months
preceding the start of the repayment period, specifically
requests that repayment be made over a shorter period) nor more
than 10 years beginning 6 months after the month in which the
student ceases to carry at an eligible institution at least
one-half the normal full-time academic workload as determined
by the institution,
except -
(i) as provided in subparagraph (C);
(ii) that the note or other written instrument may contain
such reasonable provisions relating to repayment in the event
of default in the payment of interest or in the payment of
the cost of insurance premiums, or other default by the
borrower, as may be authorized by regulations of the
Secretary in effect at the time the loan is made; and
(iii) that the lender and the student, after the student
ceases to carry at an eligible institution at least one-half
the normal full-time academic workload as determined by the
institution, may agree to a repayment schedule which begins
earlier, or is of shorter duration, than required by this
subparagraph, but in the event a borrower has requested and
obtained a repayment period of less than 5 years, the
borrower may at any time prior to the total repayment of the
loan, have the repayment period extended so that the total
repayment period is not less than 5 years;
(C) provides that periodic installments of principal need not
be paid, but interest shall accrue and be paid, during any
period -
(i) during which the borrower -
(I) is pursuing at least a half-time course of study as
determined by an eligible institution; or
(II) is pursuing a course of study pursuant to a graduate
fellowship program approved by the Secretary, or pursuant
to a rehabilitation training program for individuals with
disabilities approved by the Secretary,
except that no borrower shall be eligible for a deferment
under this clause, or a loan made under this part (other than
a loan made under section 1078-2 or 1078-3 of this title),
while serving in a medical internship or residency program;

(ii) not in excess of 3 years during which the borrower is
seeking and unable to find full-time employment; or
(iii) not in excess of 3 years for any reason which the
lender determines, in accordance with regulations prescribed
by the Secretary under section 1085(o) of this title, has
caused or will cause the borrower to have an economic
hardship;
and provides that any such period shall not be included in
determining the 10-year period described in subparagraph (B);
(D) provides for interest on the unpaid principal balance of
the loan at a yearly rate, not exceeding the applicable maximum
rate prescribed in section 1077a of this title, which interest
shall be payable in installments over the period of the loan
except that, if provided in the note or other written
agreement, any interest payable by the student may be deferred
until not later than the date upon which repayment of the first
installment of principal falls due, in which case interest
accrued during that period may be added on that date to the
principal;
(E) provides that the lender will not collect or attempt to
collect from the borrower any portion of the interest on the
note which is payable by the Secretary under this part, and
that the lender will enter into such agreements with the
Secretary as may be necessary for the purpose of section 1087
of this title;
(F) entitles the student borrower to accelerate without
penalty repayment of the whole or any part of the loan;
(G)
(i) contains a notice of the system, [1] of
disclosure of information concerning such loan to credit bureau
organizations under section 1080a of this title, and (ii)
provides that the lender on request of the borrower will
provide information on the repayment status of the note to such
organizations;
[1] So in original. The comma probably should not appear.
(H) provides that, no more than 6 months prior to the date on
which the borrower's first payment on a loan is due, the lender
shall offer the borrower the option of repaying the loan in
accordance with a graduated or income-sensitive repayment
schedule established by the lender and in accordance with the
regulations of the Secretary; and
(I) contains such other terms and conditions, consistent with
the provisions of this part and with the regulations issued by
the Secretary pursuant to this part, as may be agreed upon by
the parties to such loan, including, if agreed upon, a
provision requiring the borrower to pay the lender, in addition
to principal and interest, amounts equal to the insurance
premiums payable by the lender to the Secretary with respect to
such loan;
(3) the funds borrowed by a student are disbursed to the
institution by check or other means that is payable to and
requires the endorsement or other certification by such student,
except -
(A) that nothing in this subchapter and part C of subchapter
I of chapter 34 of title 42 shall be interpreted -
(i) to allow the Secretary to require checks to be made
copayable to the institution and the borrower; or
(ii) to prohibit the disbursement of loan proceeds by means
other than by check; and
(B) in the case of any student who is studying outside the
United States in a program of study abroad that is approved for
credit by the home institution at which such student is
enrolled, the funds shall, at the request of the borrower, be
delivered directly to the student and the checks may be
endorsed, and fund transfers authorized, pursuant to an
authorized power-of-attorney; and
(4) the funds borrowed by a student are disbursed in accordance
with section 1078-7 of this title.
(b) Special rules for multiple disbursement
For the purpose of subsection (a)(4) of this section -
(1) all loans issued for the same period of enrollment shall be
considered as a single loan; and
(2) the requirements of such subsection shall not apply in the
case of a loan made under section 1078-2 or 1078-3 of this title,
or made to a student to cover the cost of attendance at an
eligible institution outside the United States.
(c) Special repayment rules
Except as provided in subsection (a)(2)(H) of this section, the total of the payments by a borrower during any year of any repayment period with respect to the aggregate amount of all loans to that borrower which are insured under this part shall not, unless the borrower and the lender otherwise agree, be less than $600 or the balance of all such loans (together with interest thereon), whichever amount is less (but in no instance less than the amount of interest due and payable).
(d) Borrower information
The lender shall obtain the borrower's driver's license number, if any, at the time of application for the loan.>>
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My experience with grace periods was this:

I used up my 6 month grace period after completing undergrad. When I went back and complete grad school, I was granted another 6 month grace period for my GRAD school loans only, my undergrad loans went right into repayment.

Since you mention that there was a 4 month period until you started the fellowship, unless you submitted a "bridge" deferment form to cover you from the end of one academic period to the beginning of another, I bet those 4 months were considered part of your grace period. I would check to see when your FIRST in-school deferment was processed for your fellowship as they may have held it until the grace period was up.
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My lender did this to me while I was on my year-long Fulbright; used up the six-month grace period then gave me another deferment for the rest of the time.

On a cheery note, however, if you have ANY loans you are consolidating with direct that have a grace period, and you have an in-school deferment, you'll get a new grace period on the new consolidation loan.

Blue
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