Sallie Mae: Financial Hardship Options

If you’re facing financial hardship with your Sallie Mae private student loans, know that you’re not alone, and options are available. Even though Sallie Mae doesn’t provide income-based repayment plans, it offers several programs for those struggling financially:

1. Deferment: This allows you to temporarily reduce or halt payments in some cases, like if you’re enrolled in school at least half-time. But keep in mind that interest continues to accrue during deferment.

2. Forbearance: A temporary suspension of payments due to hardship.

3. Interest Rate Reduction Program: Lowers your interest rate for 6-12 months.

Struggling persistently? Consider exploring refinancing options.

But if you’ve attempted to refinance your Sallie Mae loans and were denied due to credit score, income, or loan balance, there’s another route to consider. You may need to explore negotiating a settlement or filing for student loan bankruptcy. Both options may temporarily tarnish your credit score, but they could provide the escape hatch you need to dig yourself out of this debt.

You may also like:

• Is Sallie Mae a Federal Loan?

• Can Sallie Mae Garnish Tax Refunds?

If Sallie Mae doesn’t lower your payments, don’t lose heart. It’s challenging — especially because Sallie Mae doesn’t offer flexible student loan repayment options like the federal government — but possible to negotiate lower monthly payments or even settle your debt. Here’s a roadmap for success:

1. Get familiar with your loan and financial situation: Understand your loan terms, interest rate, and monthly payments. Decide how much you can truly afford to pay.

2. Contact Sallie Mae: Reach out to them at 800-472-5543 and explain your financial hardship. Be honest about your circumstances and ask about potential assistance or alternative plans.

3. Consider their programs: Sallie Mae offers options like the Interest Rate Reduction Program and the Graduated Repayment Plan. These can reduce your payments temporarily, giving you financial breathing room.

4. Think about automatic payments: Enrolling could mean a 0.25% interest rate reduction, provided your loan is eligible and payments are successful.

5. Stay persistent and professional: Negotiations can take time and patience. Stay courteous and have your documentation at hand to validate your financial difficulties.

6. Contemplate refinancing: If Sallie Mae doesn’t budge, consider refinancing with another lender to lower your rate or get better terms.

7. Settlement: More common with private than federal loans, the settlement amount varies. But be prepared for possible implications. You’ll need to fall behind on monthly payments and default, hurting your and your cosigner’s credit. Plus, you’ll typically need a lump sum of at least 60% of the balance or be able to pay upwards of 75% of the current balance over 48 months

Then, there’s bankruptcy.

If you cannot refinance or afford a settlement, bankruptcy might be your best bet, particularly if your income to private student loan debt ratio is more than 1:1.5 or you have a high-interest rate.

For example, bankruptcy could be a viable option if you’re making $50,000 a year but owe $75,000 on your student loans with a high interest rate.

Filing for student loan bankruptcy to deal with Sallie Mae loans is a path I’ ‘ve helped several people navigate. It’s often easier to do because private lenders don’t offer income-driven repayment plans based on your family size and discretionary income or loan forgiveness programs like Public Service Loan Forgiveness.

Related: Sallie Mae Loan Forgiveness

If you can’t pay your Sallie Mae student loans, several potential consequences could occur:

1. Delinquency: Miss a payment, and you risk late fees, loss of interest rate reductions, and a credit score dip.

2. Default: Fail to repay, and the entire balance comes due, staining your credit report for up to seven years. Defaulting on Sallie Mae Loans also puts you at risk of having your wages garnished or a lien being put on your home.

3. Loss of Benefits: You could lose access to deferment, forbearance, and other payment options.

4. Wage Garnishment and Tax Refund Seizure: Sallie Mae can garnish your wages for defaulted student loans, but only after they take you to court and get a judgment. Private lenders can’t take your income tax refund if you default. That collection power is reserved for federal student loans.

5. Legal Action: In extreme cases, lenders may take legal action against defaulting borrowers.

To dodge this fallout, contact Sallie Mae if you’re struggling. They might suggest solutions like deferment, forbearance, or interest rate reduction programs.

If you find yourself unemployed and your request for deferment or forbearance is denied by Sallie Mae despite your economic hardship, here are some steps you can take:

• Re-establish contact with Sallie Mae to discuss your situation and explore alternative payment plans.

• Apply for unemployment benefits if you’re eligible, as this income can help you manage your student loan payments.

• Review your budget and cut expenses to allocate more funds towards your student loan payments.

• Seek employment or freelance work to generate income and make at least partial payments on your loans.

• Consider refinancing your private student loans with another lender. Refinancing may help you secure a lower interest rate, improve loan terms, or shorten your repayment term.

Sometimes, your student loan may be forgiven, waived, or modified. Here are a few examples:

• Unemployment: If you’re unemployed, you may request deferment or forbearance from Sallie Mae. Other alternatives like refinancing your loans could be considered if this is denied.

• Borrower’s Death: In the unfortunate event of a borrower’s death, Sallie Mae will typically waive the current balance on the loan. But terms for different private student loans may vary, so reviewing your loan agreement is essential.

• Predatory Lending Victims: If you suspect you’ve been a victim of predatory lending, several options are available, including filing complaints, seeking legal help, negotiating with Sallie Mae, and exploring loan forgiveness or cancellation programs.

• Bankruptcy: Although it should be considered a last resort, bankruptcy can be an option. Discharging student loans through bankruptcy can be challenging but not impossible. If you can prove that repaying your student loans would cause undue hardship, you may qualify for a discharge.

These options should be carefully considered, and professional advice should be sought as needed.

Sallie Mae has faced accusations in the past. They were accused of predatory lending practices from the mid-2000s to 2010, particularly targeting vulnerable borrowers from for-profit schools. In 2022, Navient, a company that spun off from Sallie Mae, settled a lawsuit, agreeing to cancel $1.7 billion in private student loans, although they claimed no violation of any laws.

If you’ve met the eligibility requirements for the Navient lawsuit, your loans would’ve already been written off.

At this point, your options to get rid of the loans due to predatory lending

Beware of the common signs of predatory lending by Sallie Mae or any other lender, which might include:

• Exorbitantly high-interest rates, sometimes up to 35% or more.

• Unexpected fees, damaged credit, or lost loan records and repayment benefits due to loan servicer transfers.

• Aggressive sales tactics, like frequent calls, home visits, or pressure to make quick decisions.

• Lack of transparency about the terms of the loan.

• Targeting vulnerable borrowers, including low-income individuals, minorities, the elderly, or those with poor credit scores.

• Encouraging loan flipping or frequent refinancing, leading to higher costs each time.

• Encouraging borrowers to lie or provide false information on loan applications.

Related: How to Get Rid of Private Student Loans

Feeling overwhelmed by Sallie Mae loans can be challenging, but you’re not alone. My team and I are here to help navigate the complexities of student loan repayment.

We can craft a strategy suited to your unique financial circumstances.

Don’t hesitate—schedule a strategy call with us today, and let’s start your journey toward financial freedom.