Though awareness of student debt problems continues to grow, and government agencies such as the Consumer Financial Protection Bureau (CFPB) and the U.S. Government Accountability Office (GAO) are working on making improvements to default rates, little has changed so far—especially for those with private student loans.
Borrowers with federal loans can apply to have them forgiven, cancelled, or discharged . There are certain qualifications and requirements for forgiveness programs so not all federal student loans qualify, but it’s a possibility if you fit the narrow qualifications.
But can private student loans be forgiven? The answer is no, which can be challenging since private-loan providers can often charge higher interest rates.
Generally, the only time a lender will say a private student loan is eligible for forgiveness is under extremely dire circumstances. For example, if a borrower dies or is completely disabled. Even though there isn’t a formal process for private student loan forgiveness, there are a few things you can do to better manage your private loans. Here are a few moves to consider:
Start by Talking to Your Lender
Don’t kid yourself into thinking that if you can just avoid calling attention to yourself, no one will notice that you’re struggling to repay your student debt. You aren’t the first (and you won’t be the last) to ask for help, and many lenders offer some type of loan modification. You may be able to negotiate a lower interest rate, a lower payment over a longer term, or set up a period during which you can make interest-only payments.
Be ready to answer some uncomfortable questions about why you’ve fallen behind, what other debts you’re currently paying, and what your future income prospects are. Your lender will want to gain a clearer understanding of your financial situation in case a term restructuring of your loan is possible.
Think About Pressing Pause
Some private lenders offer deferment or forbearance options, which will allow you to temporarily postpone making payments. Deferment is sometimes available to borrowers who are planning to go back to school or who are entering military service.
Forbearance is typically available for those who have had an unexpected hardship that makes repayment difficult, such as an illness or job loss. Keep in mind that student loan interest will still accrue during these private loan payment breaks, so don’t jump into this option without doing the math and understanding what it could mean for your financial future.
Refinancing your student loans can offer several benefits. If you tackle your loans before they become problematic or burdensome, and you have a good credit history and solid income potential, you may be able to qualify for a lower interest rate or to reduce the amount of money you pay over the life of your loan.
Your new lender will pay off your old loans and issue you a new loan(s) based on the terms you agree to. And you may be able to consolidate all your old loans into one manageable payment. A few lenders, including SoFi, will consolidate and refinance both federal and private loans, something that wasn’t doable in the past. You’ll also be given a choice between a fixed or variable rate loan, whichever suits your personal situation. Again, do your homework:
• Be sure you’re getting the lowest rate possible with terms that fit your short- and long-term needs.
• Be aware of any fees that will add to your costs.
• Check into the benefits you might lose if you refinance, and also what perks you might gain. For example, SoFi offers career counseling and member discounts. However, you may lose federal loan benefits by refinancing. Federal loan benefits can seriously reduce your monthly payments and even allow your loans to be forgiven after a certain amount of time.
For example, income-driven repayment plans can lower your monthly payment for federal loans. And if you work in certain public service professions, you may qualify to have your loans forgiven after 10 years of qualifying payments under the Public Service Loan Forgiveness program.
• Consider lenders who initially will do a “soft credit pull” before you actually apply with them to refinance your student loan. That way shopping around for interest rates won’t potentially impact your your credit rating.
Find Out What Your Career Can Do For You
Your employer or professional peers may be more accommodating than your current lender when it comes to assisting you with your private loan predicament—especially if you’re a good catch. Many industries and professional associations offer student loan repayment assistance, including student loan forgiveness options for firefighters, teachers, lawyers; and doctors, nurses, and other health-care workers.
Make a Plan for Handling Your Loans—and Execute It
If you can save some money by tapping into one of the many programs available to federal student loan borrowers—such as an income-driven plan—you may be able to concentrate more on your private loan debt.
This doesn’t mean you should neglect your federal loan payments; there are consequences if you fall behind or default on those loans as well. But if a federal loan repayment program can give you a little extra budgetary breathing room, you might want to make the most of it.
Handling student loan debt and repayment options can be overwhelming—and frustrating at a time in your life when you’d rather be focusing on other things. But actively dealing with your student loan debt by creating a repayment plan you can stick to is one of the best ways to get your student loan debt under control.
Be honest with yourself about your spending habits and any changes you could make to better afford your loan payments. And if you don’t see any clear way out—ask for help. If your private student loan provider isn’t willing to work with you, there are other lenders who might. Read reviews. Ask questions. Find the best fit for you.
And try to always keep up to date on what’s happening with private student loan repayment possibilities and forgiveness options. As the public outcry over student loan debt grows—and politicians start to listen —there may be changes on the horizon. Meanwhile, there is help and plenty of repayment options available. So stay optimistic and open-minded about the possibilities.
The advice provided on this website is of a general nature and does not take into account your specific objectives, financial situation, and needs. Before acting on this advice, you should consider its appropriateness given your own circumstances.
Notice: SoFi refinance loans are private loans and do not have the same repayment options that the federal loan program offers such as Income Based Repayment or Income Contingent Repayment or PAYE. SoFi always recommends that you consult a qualified financial advisor to discuss what is best for your unique situation.