Unlike Federal student loans, whose rules are set largely by federal law, private loan rules are based upon the agreement struck between you and your lender. As a result, what works with one lender may not work with another. That being said, most of the suggestions in this article apply to nearly all borrowers.
Call and ask for lower payments.
It may sound crazy, but sometimes all that is necessary is a simple phone call. Like the federal government, your lender may have multiple repayment plans to choose from. But beware, lower payments now mean you will pay more interest over the life of the loan. Be especially caution with forbearance and interest only payments. They may make the next few months easier, but doing so will make your student loan problem harder to deal with in the future.
Refinance or consolidate your loan.
When you refinance or consolidate your loans, you are essentially getting a new loan from a new company and using it to entirely pay off your old loan.
This approach can lower your payment in two ways. First, you can lock in a lower interest rate. Second, you can find a company that may allow you to take longer to pay off your loan. If everything else stays the same, an you change from a 10 year repayment plan to 15 or 20 years, your monthly payment will drop considerably. The downside is that you may spend more on interest in the long run. Doing the math to weigh your options is critical.
If you are interested in going this route, it is critical that you get your financial ducks in a row before you apply.
Ideally, you have a good credit score and a good income relative to your debt. Paying off a credit card or other loan can help your chances of approval.
If you have credit or income issues you will probably need a cosigner to help you get the loan. This site has already discussed ways to find a cosigner and the things cosigners should know before they sign the loan.
If you are interested in exploring private loan consolidation, be sure to check out our reviews on the various options out there.
Sign up for auto withdrawal.
Yes, this option sucks. At best your lender will drop your interest rate half a percent and that only happens if you are comfortable with giving your lender access to your bank account. Best case scenario, your payment drops slightly.
Even though it isn’t much, this approach is still worth considering because it still does save you some money. When it comes to student loans, saving a nickel and a dime here and there can make a difference.
If nothing else, it is easy to do and you can pat yourself on the back for making some progress on your student loans.
Enroll in lender specific programs for people struggling with their debt.
If your loans have fallen behind, you are likely looking at an uphill battle. However, some lenders do have programs in place where they will temporarily lower your interest rate to help you get your debt under control.
The most common example of this is the Sallie Mae rate reduction plan. Sallie Mae doesn’t advertise it, but it can be a great way to get your debt straightened out.
When borrowers to into default it is always bad for the borrowers and usually bad for the lender. Therefore, it is often in the best interests for everyone involved to come up with a plan that works.
Borrower beware: if you do work something out with your lender, be sure you get it in writing. Doing this helps prevent you from being the victim of a mistake or a shady lender.
None of these approaches are an easy fix, but if you research all of your options and put together a reasonable long term plan, you can get your debt under control.