Private Student Loan Help: How to Get It

Private student loan help includes refinancing for a lower interest rate, missing payments to negotiate a settlement, filing bankruptcy to discharge the debt, or refusing to pay and waiting for the statute of limitations to run out. Forgiveness is rarely an option, and the Biden administration has done nothing to help borrowers saddled with private student loan debt.

With private student loan debt, you have few options for help. Your lender or loan servicer usually won’t let you stop paying ridiculous amounts you simply cannot afford by letting you temporarily pause payments with a deferment or forbearance due to financial hardship, agree to lower your interest rate or let you switch over to income-based repayment plans. They can keep asking you to pay more than you can afford, no matter how many extra hours you work or how many cuts you make to your budget.

Related: How Can I Get Out of Paying Private Student Loans?

In the eight years since I began assisting student loan borrowers, one constant has been that help with private student loans is limited to four options:

• Refinancing to get a better interest rate.

• Missing several monthly payments, going into default, and then negotiating a settlement.

• Filing for bankruptcy, followed by filing an adversary to discharge student loan debt.

• Skipping your student loan payments, defaulting, and then avoiding a lawsuit until the statute of limitations ends.

Keep reading to learn what to do about private student loans you’re struggling to pay.

Student loan refinancing is the only way to permanently lower the monthly payments on private student loans. But to do that, you’ll need a good credit score and enough income to cover your living expenses, credit card debt, and student loan payments.

If you want the best rates and repayment terms, you’ll need to have a clean credit history, a credit score in the high 700s, and agree to pay your loans over a shorter repayment period. Banks, credit unions, and other online financial institutions offer the lowest interest rates to people who agree to pay their loans faster. Depending on your loan balance, you might need to stretch the payments on your new loan over 15 to 20 years to get a payment you can afford.

Related: How to Refinance Student Loans

Use an online marketplace like Credible to shop simultaneously with multiple private student loan lenders. Keep in mind that, due to recent inflation, interest rates may be higher today than they were a few months ago. You might get a lower rate today if you choose a variable-interest-rate loan. When rates fall, you may be able to refinance your loans again to obtain a new loan with a lower fixed interest rate.

Related: How Often Can You Refinance Student Loans?

Negotiating a payoff may be your best option if your lender refuses to offer a repayment option you can afford and refuses to place your account in deferment or forbearance. But it’s not an immediate option. You can’t call your loan servicer and offer to pay less than the current balance in a lump sum. It doesn’t matter how long you’ve had the loans, how many payments you’ve made, or the financial hardship you’re battling. Your servicer won’t accept a settlement offer until you’ve fallen behind on payments for several months and have defaulted.

Missing payments will temporarily ruin you and your cosigner’s credit. It will also put you at risk of being sued and having your wages garnished or a lien placed on your home. But it may let you negotiate a settlement that lets you pay significantly less than you owe in a lump sum or over a few years.

Related: How to Settle Student Loan Debt

If you can’t qualify for refinancing or afford a settlement, filing for bankruptcy may be your best option. Neither Chapter 7 nor Chapter 13 bankruptcy will automatically discharge your student loan debt. To do so, you must file an adversary proceeding and persuade the judge that the loans are causing you and your dependents undue hardship.

Related: How to Prove Undue Hardship for Student Loan

Based on what I’ve seen over the years, it’s easier to get rid of private student loans in bankruptcy than federal student loans. Private lenders don’t offer income-driven repayment plans, flexible forbearance options, and loan forgiveness programs like Public Service Loan Forgiveness or IDR plan forgiveness. They also typically have higher interest rates that can cause your balance to balloon. Combined, those things make it easier to convince a judge you can’t pay your loans without undue hardship. Read more about filing bankruptcy on student loans.

Private student loans have a legal time limit that lenders and debt collectors must follow when collecting a delinquent debt. That period can be from three to 10 years from the date your loans were charged off. After that, they become time-barred, which means you can’t be sued for the loans.

Waiting for the statute of limitations to end is dangerous. Many lenders like Sallie Mae, SoFi, and Navient routinely take borrowers to court to get a judgment that lets them take from their bank accounts, garnish their paychecks, and put a lien on their homes.

Related: Will SoFi Sue Me?

Determining which statute of limitations applies to your loans is also complicated. The statute of limitations can refer to the state where you took out the loan, the current state you live in, or the state law specified in your promissory note, depending on where you live,

Related: How to Get a Copy of a Student Loan Promissory Note

There are few private student loan forgiveness programs. And those that exist wipe out the debt only if you or your cosigner become totally and permanently disabled. Private lenders won’t forgive your loan balance because you’ve worked in public service for years, suffered financial hardship, or paid back what you borrowed. Those are all programs the U.S. Department of Education offers to federal student loan borrowers.

Related: Will Student Loan Forgiveness Cover Private Student Loans?

Unfortunately, there’s no way to refinance your loans with the federal government or include them in a consolidation loan application.

Note: Some employers provide student loan repayment assistance programs, which will pay off part of your debt. Typically, the eligibility requirements demand that you agree to work in a specific area or specialty for several years.

Related: Help With Defaulted Private Student Loans

Good luck if you need help paying private student loans. You can ask your lender to lower your payment or change your interest rate, but they’ll usually refuse. At that point, your options are to refinance with a new lender, stop making payments in hopes of negotiating a settlement, file student loan bankruptcy, or skip payments and wait for the statute of limitations to end.

Let’s talk if you want help coming up with a plan for your student loans. I’ve helped hundreds of people like you find a way out of loans they’ve been struggling with for years.

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