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Advocacy Brief: Department of Education Reaffirms No Change in Economic Hardship Deferment

The Department of Education recently confirmed that the debt-to-income ratio (20/220) qualifying pathway for economic hardship will not be changed as a result of the College Cost Reduction and Access Act. The economic hardship deferment allows medical residents to postpone payment of their student loans for up to 3 years, during which time no interest accrues on the subsidized portion of their loan. Most medical residents qualify for economic hardship under the debt-to-income ratio criteria. While the College Cost Reduction and Access Act eliminated the debt-to-income ratio in statute, Secretary of Education Margaret Spellings has used her authority to continue this qualifying pathway. However, medical school financial aid professionals have reported that some lenders are not aware of this continuation and are rejecting qualified applicants. Please be aware that educational loan servicers and lenders currently should be offering – and should never have stopped accepting – applications for the economic hardship deferment from medical residents that qualify under the debt-to-income ratio.

The College previously expressed concern about the elimination of the 20/220 pathway in a letter to Congress and recently endorsed legislation that would make the 20/220 Pathway for Economic Hardship Deferment Permanent and expand the current economic hardship qualifications for medical residents. The official endorsement letter can be located online.

Back to December 2007 Issue of IMpact

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