If you’re looking for private student loan forgiveness programs, you might come up short handed. That’s because they don’t exist.
You may have read or heard about student loan forgiveness programs, such as Public Service Loan Forgiveness and Teacher Loan Forgiveness. Those are only options for borrowers with eligible federal student loans.
Some private student lenders will discharge your debt if you become permanently disabled, but that’s not always the case. Nor is it much solace if you’re looking for options today. Private student loans with a cosigner may also be discharged if you die (the debt will never pass on if you don’t have a cosigner). But again, that’s not much help.
If you’re looking for help with private student loans, either because you’re having trouble making payments or looking for ways to pay them off sooner, you might want to consider the following.
Private Student Loan Modification
When you’re having trouble making payments, one of the first things to do is reach out to your lender or loan servicer. Some private student lenders have hardship or loan modifications programs that you can use to temporarily lower your monthly payment and/or your interest rate.
Contact your lender as soon as possible because silence won’t get you anywhere, and it might even limit your options.
For example, if your private student loans are in default, meaning you’re 120 or more days late on a payment, you might not qualify for one of the assistance programs. You also could face fees, immediately owe the entire loan balance, and wind up having to deal with a collections agency or garnished wages.
Refinance to Lower Your Interest Rate and Payments
If you’re struggling to make your monthly payments, refinancing might not be the best option. But it could be a good idea if you’re looking to pay off the debt sooner, lower your monthly payments, and save money on interest.
Many students have poor, if any, credit when they first take out student loans and qualify with the help of a cosigner. If you’ve built credit since graduation and have a steady income, you could qualify to refinance your student loans.
When you refinance a loan, you take out a new loan to repay your current debt. Your new interest rate could be lower, which can lower your monthly payment and repayment term. If you can afford to make higher payments and get a lower interest rate, you could shave years of your repayment period.
The lowest interest rates are available to the most creditworthy applicants. Your credit score can be important, but so is your monthly income, collective monthly debt payments, loan repayment history, and employment status.
You can also refinance federal student loans, and doing so could lower your interest rate. However, you’ll lose the federal loan repayment options and protections, including the option to use one of the federal loan forgiveness programs. If you want to keep those options open, you could refinance your private student loans, but not your federal student loans.
Put Your Loans into Forbearance or Deferment
It won’t get rid of your private student loans, but you may be able to temporarily stop making payments by putting them into deferment or forbearance.
Forbearance and deferment should be a last-resort option for many borrowers. Your private student loans will continue to accrue interest while you’re not making payments, and your total debt can grow significantly during this time.
However, if you won’t be able to make payments, these are better options than missing payments and winding up with fees and a damaged credit score.
Forbearance is generally for people who’re having trouble making payments due to financial hardship, possibly because of illness or the loss of a job. You may only be able to put your loans into forbearance for six months to a year.
By contrast, deferment is often for people who may have trouble making payments because they’re going back to school, join the military, enroll in a residency program, or join a public service organization, such as the Red Cross or Peace Corps. You may be able to defer your loans for up to several years.
Your options may can depend on your circumstances, loans, and lender, and whether or not you’ve taken forbearance or deferment in the past. In some cases, lenders impose a lifetime limit on the amount of time a loan can be in either program.
The rules may be different for federal student loans as well. For example, some types of federal student loans won’t accrue interest during deferment.
Review Your Federal Student Loan Options
Your focus may be on your private student loans at the moment, but if you have a mix of federal and private student loans, you could take a big-picture approach.
Although your private student loans won’t qualify, you may be able to lower your federal student loan payments by switching to one of the income-driven repayment plans. This can free up some of your monthly cash flow, making it easier to pay your private student loans and other bills on time.
Find Another Source of Income
Lowering your student loan payments or putting off your payments can help you make ends meet, but so could increasing your income. Finding a way to make more money may actually be the best option in the long run. Delaying or lowering your payments can lead to paying more in interest over time.
Of course, making more money is easier said than done. But it is possible. Look for a second job, increase your hours or pay rate at your current job, or find flexible work as a participant in the gig economy. The work may not be glamorous, but it can help you get ahead.