Managing Private Student Loan Debt: Options for Relief

Private student loans can be a great option for financing higher education when federal loans are maxed out. However, these loans lack many of the protections and repayment options of federal loans. If you’re struggling to make payments on private student debt, there are still several strategies to find relief.

Refinancing Private Student Loans

One of the best ways to lower your monthly payment on private student loans is to refinance at a lower interest rate. When you refinance, you take out a new loan from a private lender to pay off your existing loans. This allows you to potentially qualify for a lower rate based on improved credit and income.Refinancing can also help simplify repayment by consolidating multiple private loans into one new loan with just one monthly payment. Be sure to shop around and compare offers from multiple lenders to find the best rate and terms. Some top private student loan refinancing lenders include SoFi, Splash Financial, and Earnest.

Request Alternative Repayment Options

If refinancing isn’t an option, contact your private student loan servicer directly and ask about alternative repayment plans – many lenders offer options beyond standard repayment. For example:

  • Graduated repayment: Payments start low and increase gradually over time.
  • Extended repayment: Stretches out the loan term to 15-20 years to lower monthly payments.
  • Interest-only payments: Pay only the accruing interest for a set period of time.

Provide documentation of financial hardship when requesting alternative repayment. Lenders want to understand your situation in order to create a customized plan. Be persistent and prepared to negotiate – private lenders aren’t required to offer income-driven repayment like federal loans, but many are willing to work with borrowers.

Apply for Deferment or Forbearance

If you are unable to keep up with payments temporarily due to financial hardship, job loss, or returning to school, deferment and forbearance allow you to pause payments for a set period of time.Deferment is typically for borrowers in school or the military. Forbearance is for those facing unforeseen financial challenges. With both options, interest continues accruing during non-payment periods. Review deferment and forbearance policies with your lender. Many private lenders added COVID-19 related forbearance options as well.

Seek Loan Repayment Assistance Programs

Some states offer student loan repayment assistance programs (LRAPs) that help certain professionals, like teachers, nurses, doctors, and public interest lawyers. These programs provide grants to qualified borrowers to put toward their student loan balances.LRAP availability and eligibility requirements vary widely by state. Search “[state name] student loan repayment assistance” to find programs in your area. Your employer may also offer a student loan repayment benefit.

Negotiate a Settlement on Defaulted Loans

If you have defaulted on private student loans and owe a past due balance, you may be able to settle the debt for less than the full amount. Contact your lender to discuss settlement terms – often between 40-70% of the balance. Get any settlement agreement in writing before making a payment. Settling debt can impact your credit score.

Explore Private Student Loan Bankruptcy Discharge

In some cases, you may be able to fully or partially discharge private student loans through bankruptcy. This is a complex legal process best navigated with an attorney. You must file a separate adversary proceeding and prove undue hardship. Be prepared to provide financial records and make your case in bankruptcy court.

Avoid Student Loan Debt Relief Scams

Beware of any company that promises to cancel your private student loans or charges an upfront fee – these are scams. Legitimate relief options do not require money up front. Carefully research any company offering debt settlement services before sharing personal information or making payments.

Create a Student Loan Repayment Strategy

In addition to the options above, get a complete picture of your finances and create a repayment strategy:

  • List all student loans and balances, interest rates, monthly payments, etc.
  • Make minimum payments on all loans first.
  • Put any extra funds toward the loan with the highest interest rate.
  • Ask lenders to apply extra payments directly to the principal balance.
  • Avoid deferment/forbearance unless absolutely necessary.
  • Enroll in auto-pay and payment reminders to stay on track.
  • Look for ways to increase income to put toward loans.
  • Cut discretionary spending to free up more cash for repayment.

Don’t Give Up Hope

Private student loans can feel like a life sentence, but there are always options to reduce the burden. Be persistent and creative, and don’t give up trying to find a solution. If you hit roadblocks with your lender or servicer, escalate to managers and file complaints with the Consumer Financial Protection Bureau. Relief may take time, but is possible with diligence.

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