This week we cover the two ways to postpone (not necessarily reduce) those payments - deferment and forbearance. These apply primarily to grads who are unemployed or facing temporary hardship - both conditions certainly common enough in our current recession.

The qualifications for deferment and forbearance vary and periodically change. Among the possible qualifying reasons: returning to school, temporarily disabled, other medical problems and serving in the military. Teacher loans, service in AmeriCorps and entering a medical or dental residency program also may qualify. And if other federal student loans consume over 20% of your income it's likely you'll make the cut.

(1) Deferment

A student who is unemployed or facing certain other forms of economic difficulties (see above) may be able to get his/her payments deferred - for up to three years. Check with the holder of your loan for details and qualification.

$TIP: If you don't know the name of the organization or bank that granted your loan, check the National Student Loan Data System at: http://www.nslds.ed.gov/.

If the loan is a subsidized Stafford or Perkins loan, the interest rate meter is stopped - but only for the time period during which the loan is being deferred.

(2) Forbearance

You may receive forbearance if you are NOT eligible for a deferment. With this plan, as a grad you can postpone repayment of the loan's principal in 12-month intervals and for up to three years. However, interest will continue to mount up and you are responsible for repaying it.

In order to be granted forbearance you must apply to your loan holder and you must continue to make payments until you've been officially notified that forbearance has been granted.

Bottom Line: It is crucial that you take all steps possible to avoid defaulting on student loans. Defaulters are reported by the Department of Education to the three leading credit reporting services, thus making it difficult to get a mortgage, a car loan and even credit cards with low interest rates or no annual fee.

And, keep in mind that both deferment and forbearance programs can be expensive. Do not think of them as long-term solutions. Use only in an emergency.

For Further Information, go to: http://www.finaid.org/.

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