FAQ: Reduced Payment Forbearance
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.