Student loan debt, a signature problem of the Millennial generation, has reached an all-time high. According to the Consumer Financial Protection Bureau, outstanding student loan debt is now at $1.2 trillion, with more than 7 million Americans in default.
Of this total, about $150 billion is private student loan debt. This is problematic for several reasons. Private student loans often have higher interest rates compared to federal student loans, meaning they may take more money to pay off. And there are often fewer private student loan repayment options too.
Currently, there are various programs available to provide relief for federal student loans, such as Income-Based Repayment, Pay As You Earn, and Public Service Loan Forgiveness. But even though flexible repayment terms and private student loan forgiveness may be needed, these benefits are currently only for federal student loan borrowers.
So where can you find relief? There are ways you can help ease the situation, even without private student loan forgiveness.
If you have private student loans and are struggling to pay back your debt, check out these options.
Talk to Your Lender
The first thing you need to do if you are struggling to pay back your private student loans is to talk to your lender. Every private student loan lender is different, so it is important to explore your options directly with your lender.
While your lender likely doesn’t offer private student loan forgiveness, they may have repayment options that can help you during tough times.
Private student loan giant Sallie Mae has forbearance options for people who are facing financial difficulty. Through forbearance, you can temporarily postpone your loan payments while avoiding delinquency. However, you can only be in forbearance up to twelve months.
If you are struggling with repayment and looking for private student loan forgiveness, it’s crucial that you contact your lender and don’t just abandon your student loan payments. Doing so can hurt your credit, which would negatively impact other areas of your life and finances.
Take Advantage of Federal Loan Repayment Options
If you have both federal and private student loans, you can take advantage of the special programs offered to provide relief on your federal loans and apply those savings to your private student loans.
For example, you could apply for Income-Based Repayment for your federal loans and focus on paying your private student loans first.
Since private student loan forgiveness doesn’t currently exist, it’s important that you take advantage of the federal benefits where you can and try to eliminate your private student loans as soon as possible. Use a technique to pay off your student loans faster, like the Debt Avalanche.
The Debt Avalanche targets your high-interest student loans first, which are likely your private student loans. By applying extra payments to these loans, you’ll save money on interest over the long term.
Refinance Your Student Loans
If you have private student loans, refinancing is a great way to help lower costs and make managing payments a bit easier.
Through student loan refinancing, you can consolidate all of your loans and often get a better interest rate. Some lenders like SoFi even offer extra perks like unemployment protection, which can help you find a job and put your payments on pause if you lose your job.
The main benefit of refinancing is typically reducing overall interest on your loan, potentially saving you thousands of dollars on the life of your loan. In order to be eligible for refinancing options you typically need to have:
- A good credit score
- Steady employment
- Favorable debt-to-income ratio (to calculate, take your monthly debt payments and divide it by your gross monthly income)
Each company has different requirements, terms and conditions, so do your research to find the best option for you. You can find several options on our student loan consolidation and refinancing page.
Earn Extra Income
When it feels like all your extra money is going towards student loan payments, and there is hardly anything left over, consider getting a side hustle to help you earn more. You can work nights and weekends, on your terms, to help earn more money.
Utilize your skills, creativity and passions to help expedite the repayment process. Need some ideas? Check out this list of various side hustles and learn how to get started.
Look For Updates on Private Student Loan Forgiveness
Although there are currently no options for private student loan forgiveness, there are discussions about expanding the bankruptcy law to include private student loans. Senator Dick Durbin’s Fairness for Struggling Students Act of 2015 is advocating for such a change.
“Obama has asked the Treasury and Education departments and the Consumer Financial Protection Bureau to report by Oct. 1 on whether bankruptcy laws or other laws or regulations should be changed for student loans.”
Currently, the review is focused on private student loans that don’t offer the same benefits as federal loans.
And as for actual private student loan forgiveness? There haven’t been any proposals passed to help with this problem. But that doesn’t mean there won’t be forgiveness or refinancing options offered by the federal government in the future.
Of course, we’ll keep you up to date as the conversation progresses.
Interested in refinancing student loans?Here are the top 6 lenders of 2017!
|Lender||Rates (APR)||Eligible Degrees|
|Check out the testimonials and our in-depth reviews!|
|2.56% - 6.74%||Undergrad & Graduate||Visit SoFi|
|3.64% - 7.20%||Undergrad & Graduate||Visit DRB|
|2.56% - 6.74%||Undergrad & Graduate||Visit CommonBond|
|2.43% - 7.26%||Undergrad & Graduate||Visit LendKey|
|2.59% - 8.38%||Undergrad & Graduate||Visit Citizens|
|3.00% - 7.35%||Undergrad & Graduate||Visit CollegeAve|
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