For many college grads, private student loans were and continue to be a necessary evil. Unfortunately, the very loans that paved the way for a sound education can wreak havoc on your life, especially if you’re living paycheck to paycheck.
Missed payments can decimate credit scores, and high payments can prevent you from buying a house or starting a family. Even worse, unexpected, financially taxing events can quickly make loan payments impossible after taking care of living expenses like food, shelter, and utilities.
In particular, if you have private student loans, they typically lack the flexible repayment options that federal student loans have. However, that doesn’t mean your situation is hopeless. Some private student lenders offer more flexibility than others, and there are options you can explore beyond that if you truly can’t pay your loans.
If you’re struggling to pay your student loan bills and adhere to life’s financial demands, here are four repayment options for private student loans that can help you lower your payments.
1. Talk to Your Private Student Loan Lender
One of the best ways to begin the process is to simply call your lender, who might be able to provide you with available options on how to lower private student loan payments.
However, every private lender is different, your lender may – or may not – extend the following options:
This places a temporary hold on your loan, giving you time to adjust to financial demands or setbacks. However, you will be responsible for paying interest – monthly or capitalized back into your principal loan balance.
Requirements will vary, but in general, some private student lenders may extend forbearances during times of financial trouble, if you’ve incurred medical expenses, if you’ve recently lost your job, or had a significant reduction in wages.
This is similar to forbearance, but in most cases, you aren’t responsible for the accrued interest. However, private lenders are less likely to offer this option.
Deferments may be granted if you are enrolled half-time in a college, university, or technical school, or are enrolled in a graduate fellowship program; are currently unemployed; are currently in the Peace Corps or active military service; or if you are experiencing economic hardship.
This is just what it sounds like. Your payments will reflect the monthly accrued loan interest, which typically results in lower private student loan payments, all while avoiding capitalized interest.
The requirements for interest-only repayment plans will vary by lender, so it’s best to check directly with them.
2. Consider Refinancing Your Private Student Loans
When you refinance your private student loans, it means you are taking out a new loan to pay off the existing loans in the hopes that the new loan rates and monthly payments will be more manageable, or allow you to pay the loan off more quickly.
Refinancing approvals and rates are subject to a credit check, so yours will play a major factor in determining if this is the best option. Good credit should make the process easy, but bad credit can result in application denials or higher interest rates, which probably won’t help you.
Fortunately, most lending services will allow you to add a cosigner to the loan, and a cosigner with a solid credit history can likely help you get your loan application approved and secure a lower rate.
3. Settling Your Private Student Loans
In some cases, particularly when your loans are already in default, settling them might be an option, but it’s not a guaranteed or consistently beneficial option, making it one that should be entered into with great care.
On a positive note, if settling is the right option for you, then you’ll be able to pay off your loans for a fraction of what you originally owed. However, keep in mind that many borrowers who settle are often required to pay the loan in one lump sum, which can be hard.
Additionally, there are significant risks, including long-term damage to your credit and accrued legal fees to reach the settlement.
4. Discharging Your Private Student Loans
Private lenders are not required to offer discharge opportunities, so while discharge options are available, they are very limited.
That said, your lender may have specific situations (i.e., death or permanent disability) that they deem worthy of discharge. The best way to find out what those situations are is to read your loan contract or any discharge or forgiveness information on your lender’s site. You can also, as always, call the lender to inquire directly.
Alternatively, though not always possible, some student loans can be included as part of bankruptcy relief. But determining if you’re eligible would require legal counsel.
If you’re struggling under the burden of high monthly loan payments, you might feel your financial situation is hopeless. Fortunately, that doesn’t have to be the case. Private student loan borrowers like you do have options; it just takes some time and research to sort through them and identify which one is right for you.