The Problem With Private Student Loan Repayment Options

Advertiser Disclosure

Student Loan Hero Advertiser Disclosure

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.

The problem with private student loan repayment options
Logo

We’ve got your back! Student Loan Hero is a completely free website 100% focused on helping student loan borrowers get the answers they need. Read more

How do we make money? It’s actually pretty simple. If you choose to check out and become a customer of any of the loan providers featured on our site, we get compensated for sending you their way. This helps pay for our amazing staff of writers (many of which are paying back student loans of their own!).

Bottom line: We’re here for you. So please learn all you can, email us with any questions, and feel free to visit or not visit any of the loan providers on our site. Read less

Refinancing with Earnest

Refinancing rates from 2.57% APR. Checking your rates won’t affect your credit score.

Check out Earnest

While federal student loans offer several ways to lower payments, private student loans borrowers have fewer options. Unfortunately, this leaves the borrowers who hold the $108.2 billion in outstanding private student loans, per the Q1 2017 Measure One report, at the mercy of their lenders.

Each private lender gets to decide if it will offer student loan forbearance or other assistance. Unfortunately, most private lenders provide only limited or no help adjusting payments.

Borrowers who have private student loans or students considering getting one should learn about these limitations and how they can affect repayment. Here are some of the challenges (and corresponding solutions) for private student loan repayment.

Refinancing private student loans

Your best option for relief from private student loan repayment might be to refinance your private loans. You can refinance private student loans with a variety of banks. In this case, the goal is simple: refinance student loans to interest rates that are lower than what you currently pay, which might also reduce your private student loan payment amounts.

First, however, there’s one important caveat. You’ll need to qualify for student loan refinancing. This is yet another reason why it’s important to improve your credit score, which will influence whether you’re approved.

Private student loan forbearance

If you’re having trouble with repaying your student loans, then your lender might offer you a few forms of limited relief. The best lenders provide the option to defer or forbear private student loan payments.

However, this forbearance is usually only offered in specific circumstances and is subject to the lender’s approval. Plus, private student loan deferments and forbearances are designed to give you a temporary break from payments, not long-term relief. After your forbearance is up, a private lender will expect you to resume paying this debt.

Private student loan forgiveness

If you’re hoping to get rid of private student loans through forgiveness or bankruptcy, don’t hold your breath. Both outcomes are fairly rare.

There are some programs that provide private student loan forgiveness, often dependent on your occupation or employment. These can be worth exploring, especially if you apply for federal student loan forgiveness options.

Bankruptcy discharge for private student debt

Discharging private student loans through bankruptcy is difficult, and in most cases won’t be possible. Still, private student loan discharges are sometimes granted in cases of extreme hardship, or if the borrower used the loans to attend a for-profit school they claim defrauded them.

While this might be good news for some people, the criteria (at least in this example) are fairly complicated and likely require a lawyer’s assistance.

Private student loans with variable rates

Unlike federal student loans, which all have fixed rates that don’t change, private student loans can have variable interest rates that increase (or decrease) over time, based on overall market rates.

When your interest rates go up, you have little recourse with private loans other than to apply to refinance. Keep in mind that you’ll need good credit to get student loan refinancing rates that beat what you’re currently paying.

Target private loan repayment first

If the above techniques don’t work, then your best remaining option might be to simply pay off your private student loans. You’ll need to list your debt and decide which student loans to repay first. Since private student loans have fewer benefits and protections, it can make sense to target those first.

If you decide to do so, simply modify the debt snowball method to prioritize payment of private student loans:

  1. Pay at least the minimum amount on all student loans, both private and federal.
  2. Find extra funds in your budget and make a monthly extra payment toward the private student loan that you want to pay off first. This could be the loan with the highest interest rate, lowest balance, or worst forbearance options.
  3. Continue to do this each month until the private student loan is paid off.
  4. Once this top-priority private student loan is paid off, continue with the next private loan until it’s paid off as well.

If your private loans are small in value or have lower interest rates, then this strategy might not make clear financial sense right now.

Just keep in mind that you always have more flexibility with federal student loans, should you have to adjust your repayment strategy down the road. So, you might want to take every chance you have to pay off the private loans once and for all.

Despite these potential issues with repayment, a private student loan can still make sense for some students and borrowers. If you’re aware of these drawbacks, you can shop for the best private student loans that provide these protections. Once in repayment, you can proactively manage private student loans to avoid these problems.

Jeffrey Trull contributed to this post.

Interested in refinancing student loans?

Here are the top 6 lenders of 2018!
LenderRates (APR)Eligible Degrees 
Get real rates from up to 4 Lenders at once


Check out the testimonials and our in-depth reviews!
2.57% – 6.32%Undergrad
& Graduate
Visit Earnest
2.80% – 7.02%Undergrad
& Graduate
Visit Laurel Road
2.51% – 7.80%Undergrad
& Graduate
Visit SoFi
2.76% – 8.54%Undergrad
& Graduate
Visit Lendkey
2.57% – 6.65%Undergrad
& Graduate
Visit CommonBond
2.75% – 8.69%Undergrad
& 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.