What to Do When You Can’t Afford Private Student Loan Payments

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When you’re struggling to make ends meet, your student loan payments can feel like the heaviest ball and chain weighing down your finances.

If you have federal student loans, there are many options for lowering your payments. You can opt for an income-driven repayment plan, deferment or forbearance.

But what if you have private student loans?

If you’re interested in learning how to lower private student loan payments, here’s a breakdown of the options you do have and which ones to consider

Federal vs. private student loan payments

Remember, not all student loan lenders are created equal. Especially if you compare private and federal student loan lenders.

Federal student loans are originated by the U.S. Department of Education and come with standard benefits and protections.

Usually banks and other private financial institutions provide private student loans. And since private student loans are offered by various lenders, there is no standardized protocol for dealing with payments.

In other words, each lender might do things a little bit differently.

No matter where you stand on debt, though, it’s important to come up with a good debt repayment plan to help you reduce what you pay and get your bills under control.

Lower private student loan payments with forbearance or deferment

If you’re wondering how to lower private student loan payments, consider deferment or forbearance.

Deferment is when you can temporarily postpone your student loan payments. Forbearance, which is similar to a deferment, can postpone your student loan payments for a certain amount of time.

However, both deferments and forbearance are usually offered by private lenders under specific circumstances.

For instance, Sallie Mae, a popular private student loan lender, offers a deferment for borrowers going back to school or pursuing an internship or residency. There is also a forbearance option.

Discover, another private student loan lender, offers deferment if you are in school, on active military duty, working in public service, or enrolled in a residency program.

It’s important to note that interest usually continues to accrue on your private student loans while they’re in deferment or forbearance. You’ll be responsible for late payment fees as well.

Contact your lender if you can’t afford private student loan payments

If you are struggling to come up with a strategy for how to lower private student loan payments, consider contacting your lender.

“Borrowers who are struggling financially should contact the lender to ask about their options for financial relief,” says Mark Kantrowitz, student loan expert with PrivateStudentLoans.Guru.

And if you’ve defaulted on your private student loans or are at risk of defaulting, you should ask your lender about any alternative payment plans they offer.

These plans may be considered on a case-by-case basis. To avoid default and any other issues down the road, consider ways you can keep your loans in good standing by making the payments you can after more pressing matters are taken care of.

Unfortunately, private student loans don’t usually come with income-based repayment options or forgiveness options.

Additionally, private lenders don’t offer as many flexible repayment options as federal student loans. That’s because they’re under no obligation to offer borrowers financial assistance.

“Private lenders have no obligation to offer these options on private student loans, but do so because it is more profitable to have a borrower who is current than a borrower in default,” explains Kantrowitz.

If you can’t afford private student loan payments, get in touch with your lender ASAP and discuss your options. It’s better to communicate and be proactive, instead of risking default, which could lead to a lower credit score later.

How to lower private student loan payments on your own

Aside from what your lender can offer you, there are other things you can do try to do to improve your situation.

First, opt for a bare-bones budget. A bare-bones budget is a budget that focuses only on your needs, such as food and shelter.

It’s not necessarily fun to cut back on certain things just to pay back your student loans. But if you want to avoid default, your budget is the first place to look.

Secondly, when thinking about how to lower private student loan payments, consider earning more income.

“Borrowers who are struggling financially should also consider options for increasing income,” says Kantrowitz. “This can include asking their employer for a raise, working overtime, or getting a second job in the evening and weekends.”

Additionally, you may be able to save some money on your student loans by applying for auto-debit. This can lower your interest rate by 0.25 percent with Sallie Mae, and potentially other private student loan lenders.

Of course, you only want to do this once you can truly afford your student loan payments. Otherwise, you could be hit with an overdraft fee or insufficient fee instead.

Refinance your private student loans

Another way you can reduce your private student loan payments and make them more manageable is to refinance. By refinancing student loans to a longer term, you can reduce your monthly payments, creating breathing room in your schedule.

Additionally, in some cases refinancing — even to a longer term — can save you money, if you get a lower interest rate.

However, in order to refinance your student loans, you need to meet the credit and income requirements set by the lenders. This is another type of private student loan that replaces your current debts with new loan terms that might be more manageable in your situation.

Bankruptcy

If you are unable to lower private student loan payments, you may wonder if you can opt for bankruptcy to help you start fresh.

While getting your private student loans discharged isn’t totally impossible, it’s pretty rare.

“It is almost impossible to get student loans discharged in bankruptcy,” Kantrowitz says. “Doing so requires demonstrating that the student loans represent an undue hardship on the borrower and the borrower’s dependents in an adversarial proceeding.”

“A very small percentage of borrowers are successful in getting their student loans discharged in bankruptcy,” adds Kantrowitz.

Create a strategy with your lender moving forward

If you want to learn how to lower private student loan payments, the first thing you need to do is contact your lender and discuss what options are available for you.

And if you truly can’t afford your loan payments, look at your income and expenses to see if there are changes that can be made.

Ultimately, it’s important for you to stay in touch with your lender and pay what you can to avoid default at all costs.

Interested in refinancing student loans?

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1 Important Disclosures for Laurel Road.

Laurel Road Disclosures

  1. VARIABLE APR – APR is subject to increase after consummation. The variable interest rates are based on a Current Index, which is the 1-month London Interbank Offered Rate (LIBOR) (currency in US dollars), as published on The Wall Street Journal’s website. The variable interest rates and Annual Percentage Rate (APR) will increase or decrease when the 1-month LIBOR index changes.

2 Important Disclosures for SoFi.

SoFi Disclosures

  1. Student Loan RefinanceFixed rates from 3.999% APR to 7.804% APR (with AutoPay). Variable rates from 2.480% APR to 7.524% APR (with AutoPay). Interest rates on variable rate loans are capped at either 8.95% or 9.95% depending on term of loan. See APR examples and terms. Lowest variable rate of 2.480% APR assumes current 1 month LIBOR rate of 2.07% plus 0.91% margin minus 0.25% ACH discount. Not all borrowers receive the lowest rate. If approved for a loan, the fixed or variable interest rate offered will depend on your creditworthiness, and the term of the loan and other factors, and will be within the ranges of rates listed above. For the SoFi variable rate loan, the 1-month LIBOR index will adjust monthly and the loan payment will be re-amortized and may change monthly. APRs for variable rate loans may increase after origination if the LIBOR index increases. The SoFi 0.25% AutoPay interest rate reduction requires you to agree to make monthly principal and interest payments by an automatic monthly deduction from a savings or checking account. The benefit will discontinue and be lost for periods in which you do not pay by automatic deduction from a savings or checking account. *To check the rates and terms you qualify for, SoFi conducts a soft credit inquiry. Unlike hard credit inquiries, soft credit inquiries (or soft credit pulls) do not impact your credit score. Soft credit inquiries allow SoFi to show you what rates and terms SoFi can offer you up front. After seeing your rates, if you choose a product and continue your application, we will request your full credit report from one or more consumer reporting agencies, which is considered a hard credit inquiry. Hard credit inquiries (or hard credit pulls) are required for SoFi to be able to issue you a loan. In addition to requiring your explicit permission, these credit pulls may impact your credit score
  2. Terms and Conditions Apply: SOFI RESERVES THE RIGHT TO MODIFY OR DISCONTINUE PRODUCTS AND BENEFITS AT ANY TIME WITHOUT NOTICE. To qualify, a borrower must be a U.S. citizen or permanent resident in an eligible state and meet SoFi’s underwriting requirements. Not all borrowers receive the lowest rate. To qualify for the lowest rate, you must have a responsible financial history and meet other conditions. If approved, your actual rate will be within the range of rates listed above and will depend on a variety of factors, including term of loan, a responsible financial history, years of experience, income and other factors. Rates and Terms are subject to change at anytime without notice and are subject to state restrictions. SoFi refinance loans are private loans and do not have the same repayment options that the federal loan program offers such as Income Based Repayment or Income Contingent Repayment or PAYE. Licensed by the Department of Business Oversight under the California Financing Law License No. 6054612. SoFi loans are originated by SoFi Lending Corp., NMLS # 1121636. (www.nmlsconsumeraccess.org)

3 Important Disclosures for CommonBond.

CommonBond Disclosures

  1. Offered terms are subject to change. Loans are offered by CommonBond Lending, LLC (NMLS # 1175900). The following table displays the estimated monthly payment, total interest, and Annual Percentage Rates (APR) for a $10,000 loan. The Annual Percentage Rate (APR) shown for each in-school loan product reflects the accruing interest, the effect of one-time capitalization of interest at the end of a deferment period, a 2% origination fee, and the applicable Repayment Plan. All loans are eligible for a 0.25% reduction in interest rate by agreeing to automatic payment withdrawals once in repayment, which is reflected in the interest rates and APRs displayed. Variable rates may increase after consummation. All variable rates are based on a 1-month LIBOR assumption of 2.08% effective July 25, 2018.

4 Important Disclosures for Citizens Bank.

Citizens Bank Disclosures

  1. Education Refinance Loan Rate DisclosureVariable rate, based on the one-month London Interbank Offered Rate (“LIBOR”) published in The Wall Street Journal on the twenty-fifth day, or the next business day, of the preceding calendar month. As of August 1, 2018, the one-month LIBOR rate is 2.07%. Variable interest rates range from 2.72%-8.17% (2.72%-8.17% APR) and will fluctuate over the term of the borrower’s loan with changes in the LIBOR rate, and will vary based on applicable terms, level of degree earned and presence of a cosigner. Fixed interest rates range from 3.50%-8.69% (3.50% – 8.69% APR) based on applicable terms, level of degree earned and presence of a cosigner. Lowest rates shown require application with a cosigner, are for eligible, creditworthy applicants with a graduate level degree, require a 5-year repayment term and include our Loyalty discount and Automatic Payment discounts of 0.25 percentage points each, as outlined in the Loyalty and Automatic Payment Discount disclosures. The maximum variable rate on the Education Refinance Loan is the greater of 21.00% or Prime Rate plus 9.00%. Subject to additional terms and conditions, and rates are subject to change at any time without notice. Such changes will only apply to applications taken after the effective date of change. Please note: Due to federal regulations, Citizens Bank is required to provide every potential borrower with disclosure information before they apply for a private student loan. The borrower will be presented with an Application Disclosure and an Approval Disclosure within the application process before they accept the terms and conditions of their loan.
  2. Federal Loan vs. Private Loan Benefits: Some federal student loans include unique benefits that the borrower may not receive with a private student loan, some of which we do not offer with the Education Refinance Loan. Borrowers should carefully review their current benefits, especially if they work in public service, are in the military, are currently on or considering income based repayment options or are concerned about a steady source of future income and would want to lower their payments at some time in the future. When the borrower refinances, they waive any current and potential future benefits of their federal loans and replace those with the benefits of the Education Refinance Loan. For more information about federal student loan benefits and federal loan consolidation, visit http://studentaid.ed.gov/. We also have several resources available to help the borrower make a decision at http://www.citizensbank.com/EdRefinance, including Should I Refinance My Student Loans? and our FAQs. Should I Refinance My Student Loans? includes a comparison of federal and private student loan benefits that we encourage the borrower to review.
  3. Citizens Bank Education Refinance Loan Eligibility: Eligible applicants may not be currently enrolled, must be in repayment of their existing student loan(s) and must make the minimum number of payments after leaving school. Primary borrowers must be a U.S. citizen, permanent resident or resident alien with a valid U.S. Social Security Number residing in the United States. Resident aliens must apply with a co-signer who is a U.S. citizen or permanent resident. The co-signer (if applicable) must be a U.S. citizen or permanent resident with a valid U.S. Social Security Number residing in the United States. For applicants who have not attained the age of majority in their state of residence, a co-signer will be required. Citizens Bank reserves the right to modify eligibility criteria at anytime. Interest rate ranges subject to change. Education Refinance Loans are subject to credit qualification, completion of a loan application/consumer credit agreement, verification of application information, certification of borrower’s student loan amount(s) and highest degree earned.
  4. Loyalty Discount Disclosure: The borrower will be eligible for a 0.25 percentage point interest rate reduction on their loan if the borrower or their co-signer (if applicable) has a qualifying account in existence with us at the time the borrower and their co-signer (if applicable) have submitted a completed application authorizing us to review their credit request for the loan. The following are qualifying accounts: any checking account, savings account, money market account, certificate of deposit, automobile loan, home equity loan, home equity line of credit, mortgage, credit card account, or other student loans owned by Citizens Bank, N.A. Please note, our checking and savings account options are only available in the following states: CT, DE, MA, MI, NH, NJ, NY, OH, PA, RI, and VT and some products may have an associated cost. This discount will be reflected in the interest rate disclosed in the Loan Approval Disclosure that will be provided to the borrower once the loan is approved. Limit of one Loyalty Discount per loan and discount will not be applied to prior loans. The Loyalty Discount will remain in effect for the life of the loan.
  5. Automatic Payment Discount Disclosure: Borrowers will be eligible to receive a 0.25 percentage point interest rate reduction on their student loans owned by Citizens Bank, N.A. during such time as payments are required to be made and our loan servicer is authorized to automatically deduct payments each month from any bank account the borrower designates. Discount is not available when payments are not due, such as during forbearance. If our loan servicer is unable to successfully withdraw the automatic deductions from the designated account three or more times within any 12-month period, the borrower will no longer be eligible for this discount.
  6. Co-signer Release: Borrowers may apply for co-signer release after making 36 consecutive on-time payments of principal and interest. For the purpose of the application for co-signer release, on-time payments are defined as payments received within 15 days of the due date. Interest only payments do not qualify. The borrower must meet certain credit and eligibility guidelines when applying for the co-signer release. Borrowers must complete an application for release and provide income verification documents as part of the review. Borrowers who use deferment or forbearance will need to make 36 consecutive on-time payments after reentering repayment to qualify for release. The borrower applying for co-signer release must be a U.S. citizen or permanent resident. If an application for co-signer release is denied, the borrower may not reapply for co-signer release until at least one year from the date the application for co-signer release was received. Terms and conditions apply.
  7. Average savings based on 18,113 actual customers who refinanced their federal and private student loans through our Education Refinance Loan between January 1, 2017 and December 31, 2017. The calculation is derived by averaging the monthly savings of Education Refinance Loan customers whose payments decreased after refinancing, which is calculated by taking the monthly student loan payments prior to refinancing minus the monthly student loan payments after refinancing. The borrower’s savings might vary based on the interest rates, balances and remaining repayment term of the loans they are seeking to refinance. The borrower’s overall repayment amount may be higher than the loans they are refinancing even if their monthly payments are lower.
2.57% – 5.87%Undergrad
& Graduate
Visit Earnest
2.80% – 6.38%1Undergrad
& Graduate
Visit Laurel Road
2.48% – 7.52%2Undergrad
& Graduate
Visit SoFi
2.47% – 7.99%Undergrad
& Graduate
Visit Lendkey
2.57% – 6.65%3Undergrad
& Graduate
Visit CommonBond
2.72% – 8.17%4Undergrad
& Graduate
Visit Citizens
Our team at Student Loan Hero works hard to find and recommend products and services that we believe are of high quality and will make a positive impact in your life. We sometimes earn a sales commission or advertising fee when recommending various products and services to you. Similar to when you are being sold any product or service, be sure to read the fine print understand what you are buying, and consult a licensed professional if you have any concerns. Student Loan Hero is not a lender or investment advisor. We are not involved in the loan approval or investment process, nor do we make credit or investment related decisions. The rates and terms listed on our website are estimates and are subject to change at any time. Please do your homework and let us know if you have any questions or concerns.