Repaying private student loans may be more difficult if you are struggling financially because private lenders are not required by the law to offer flexible and affordable repayment plans.
Some private lenders do offer these types of repayment assistance programs, but it will depend on who your lender is and what the terms of your contract are. If your private student loan lender promised you this kind of help when you took out the loan, either verbally or in the contract or loan brochure and materials, they must stick to those promises. Some lenders also don’t provide these programs for free, and you may have to pay a fee to sign up for one of these plans.
You should review your private loan contract carefully to better understand what rights you have. If you don’t have a copy of your loan agreement or other loan documents, you should ask your lender for a copy.
It never hurts to ask for help. If you are struggling with repayment, ask your lender about what options you may have.
What Kind of Relief Programs Do Private Lenders Offer?
Many private lenders will offer only short-term repayment relief, such as interest-only repayment plans or deferments and forbearances to pause your student loan payments temporarily.
While a pause on your student loan payments may help get you through a difficult time, interest will continue to be added to your loan while payments are postponed–even if you are in a deferment (including in-school deferment). If you can afford it, you should consider making interest-only payments during these postponement periods. Some private lenders may require you to do this.
Before signing up for these plans, you should review them carefully to see if the plans will actually help you in the long run. In the end, it may cost you more in interest and fees, so be very careful before you sign up for these programs.
While loan forgiveness and cancellation programs are very rare for private student loans, some lenders do offer these programs depending on your circumstances, such as your disability or if the primary borrower dies.
Don’t Keep Your Loans in Forbearance or Deferment for a Long Time
It is usually a bad idea to keep putting your private student loans in deferment or forbearance because interest adds up quickly. If your lender keeps offering to put your loans in forbearance, but you really can’t afford your payments, this may just be prolonging the time before you default while increasing how much you owe on your student loans.
If you are struggling to make payments, it may be worth considering refinancing your private loan or negotiating a settlement for a lesser amount than you owe with your lender (both are discussed below). If you really can’t afford the debt, you can also look into bankruptcy options. If you end up defaulting on the loan, you may be sued by the lender. Even if you are sued and think you owe the debt, you have rights and may be able to stop the lender from getting a judgment against you. See our page on lawsuits and judgments for more information.
How Can I Reduce My Private Student Loan Debt?
Many private student lenders also offer incentives to borrowers who pay on-time or sign up for automatic debit payments. These incentives may just be a small reduction in your interest rate, but it could still reduce the amount you pay back over all. Some lenders also offer certain benefits to students based on their grades or graduation. You should be careful as these “deals” are not always what they seem to be. Some lenders offer incentives that very few borrowers ever achieve.
Ask your lender if they offer any forgiveness and cancellation programs. While these are very rare for private student loans, some lenders do offer these programs depending on your circumstances, such as your disability or death of the primary borrower on loan you co-signed.
Private student loan lenders rarely do a good job of advertising or letting borrowers know about the relief programs they offer. You usually have to ask them whether or not they have these programs.
You may also be able to negotiate a settlement to pay off your student loan debt in a lump sum that is less than the total amount you owe on your student loan bill. You could also try to ask your lender for loan modification. This is an agreement that changes your loan repayment terms to make it easier for you to pay off, usually by lowering your interest rate or reducing your loan fees. If you make any of these agreements, get them in writing! See our page on settling your private student loan debt for more information.
Should I Refinance or Consolidate My Private Student Loan Debt?
Another way to potentially reduce your private student loan debt is to consider refinancing or consolidating your private student loan with another private lender. You may be able to reduce your interest rate and get better loan repayment options if you refinance or consolidate your private student loans with another lender. If you consolidate (combine) your private loans with another lender, you may also be able to simplify repayment by having one private student loan payment that’s made to one lender.
You should shop around before deciding to refinance or consolidate to make sure you are getting the best deal and not losing out on any benefits in your current loan.
Never refinance or consolidate your federal student loans with a private lender! If you do this, you will lose all of your rights to federal student loan protections, including cancellation and forgiveness programs, income-driven repayment, and deferment and forbearance options. For most borrowers, it is a bad idea to refinance or consolidate federal student loans with private loans, even if you think you will get a better interest rate. You could still end up paying more on your loans in the long run because of all of the federal benefits and protections you will lose. For more information about the risks of refinancing, see our page on refinancing student loans and the Department of Education’s website.
