Private student loans can help fill the gap needed for students to pay for their tuition and living expenses, but they do not have the same relief programs that federal student loans provide.
Federal student loans offer more borrower protections after students graduate, especially if they face difficult economic circumstances such as the loss of a job, being furloughed from a position or if their salary is inadequate to pay all their bills. When borrowers take out a federal student loan, they have a few different options to choose from such as forgiveness or deferment programs until their financial circumstances change.
Are There Relief Options for Private Student Loans?
The options for private student loan relief are fewer. Private student loan forgiveness does not exist and no lenders offer this option.
When graduates face hurdles in repaying their private student loans, some lenders provide their own temporary assistance programs. These programs may provide temporary assistance to borrowers and the programs will vary based on the lender.
For example, SoFi offers Unemployment Protection to qualifying borrowers. This program offers temporary relief to borrowers who have lost their job through no fault of their own. Borrowers can apply for Unemployment Protection and, if approved, the loans can be placed into forbearance, effectively pausing payments. Forbearance through SoFi’s unemployment protection program is offered in three-month increments for a cumulative total of 12 months over the life of the loan.
Read the fine print on temporary relief programs offered by private lenders. Generally, interest will continue to accrue while the loan is in forbearance, which can make the loan more expensive in the long-term. However, if you’re struggling to make repayments, securing forbearance could help provide breathing room to help you get back on track without missing payments.
If you are not sure whether or not the lender offers forbearance or other temporary assistance programs, try to contact them before missing any payments. They may have an option that could help or be willing to work with borrowers who are struggling.
Missing payments can potentially impact a borrower’s credit score. And if the borrower has a co-signer, their credit score may feel an impact as well.
Private Loans and COVID-19 Student Loan Relief Plans
The federal government has extended some relief options to borrowers with federal student loans due to the COVID-19 pandemic. Most of these policies do not apply to borrowers with private student loans.
As of March 2021, some borrowers with private student loans in default qualify to have their student loan payments paused. Borrowers with a defaulted loan made through the Federal Family Education Loan (FFEL) Program, may qualify for the federal protections offered . The FFEL program loans were made by private companies but were backed by the federal government. The program ended in 2010.
Recommended: Navigating Your Student Loans During COVID-19
Repaying Private Student Loans
Since there aren’t any real loan forgiveness options available for borrowers with private student loans, repaying them may become a financial priority. The repayment period for private student loans may vary based on lenders, so review the terms and payment schedule with your lender.
Some private student loans may have a grace period—a period of time after a student graduates where payments are not due. This will depend on the lender, so review your loan terms to find out if your private loan is eligible for a grace period. Interest may accrue during the grace period.
Other Ways to Payoff Private Student Loans
Other strategies to that can help students as they repay their student loans include:
• Budgeting with Purpose. Factor student loan payments into your budget and prioritize repayments.
• Enrolling in automatic payments. This can help you avoid missing payments. Some lenders may even offer a rate discount to borrowers who do enroll, so it’s worth asking.
• Funneling additional income to student loans. Influx in cash thanks to a recent birthday, tax refund, bonus at work? Make an overpayment to the student loan.
• Consider refinancing. Student loan refinancing can help qualifying borrowers secure a more competitive interest rate or preferable terms. Lowering the interest rate on a student loan could help borrowers save money over the life of the loan.
Recommended: 9 Smart Ways to Pay Off Student Loans
Why Refinancing Could Be Helpful
Refinancing could result in a lower interest rate which could also lower the minimum monthly payment. In some cases, getting a lower monthly payment requires extending the life of the loan, which can ultimately cost more.
Student loan refinancing means a new loan is obtained at a new interest rate and possibly a new term or the number of years you have to pay off the loan. Borrowers can generally choose between fixed or variable interest rates, depending on the options available at the lender they have decided to borrow from. Private lenders will generally rely on information like a borrower’s credit score and employment history to determine how much money a person can borrow, and at what interest rate.
Borrowers who are able to secure a lower interest rate may find that refinancing can help them spend less over the life of the loan. Additionally, a borrower with multiple private student loans might appreciate the opportunity to streamline their monthly payments to a single sum with a single lender.
Some borrowers may be able to get some private student loan assistance, depending on the programs offered and policies in place with their private lender. In some cases, refinancing may make sense for borrowers who can qualify for a lower interest rate.
SoFi’s private student loans do not charge application or origination fees, offer competitive rates, flexible terms, a simple online application, and human support to answer your questions.
Student Loan Refinancing
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If you are a federal student loan borrower you should take time now to prepare for your payments to restart, including the opportunity to refinance your student loan debt at a lower APR or to extend your term to achieve a lower monthly payment. (You may pay more interest over the life of the loan if you refinance with an extended term.) Please note that once you refinance federal student loans, you will no longer be eligible for current or future flexible payment options available to federal loan borrowers, including but not limited to income-based repayment plans, such as the SAVE Plan, or extended repayment plans.
IF YOU ARE LOOKING TO REFINANCE FEDERAL STUDENT LOANS, PLEASE BE AWARE THAT THE WHITE HOUSE HAS ANNOUNCED UP TO $20,000 OF STUDENT LOAN FORGIVENESS FOR PELL GRANT RECIPIENTS AND $10,000 FOR QUALIFYING BORROWERS WHOSE STUDENT LOANS ARE FEDERALLY HELD. ADDITIONALLY, THE FEDERAL STUDENT LOAN PAYMENT PAUSE AND INTEREST HOLIDAY HAS BEEN EXTENDED TO DEC. 31, 2022. PLEASE CAREFULLY CONSIDER THESE CHANGES BEFORE REFINANCING FEDERALLY HELD LOANS WITH SOFI, SINCE THE AMOUNT OR PORTION OF YOUR FEDERAL STUDENT DEBT THAT YOU REFINANCE WILL NO LONGER QUALIFY FOR THE FEDERAL LOAN PAYMENT SUSPENSION, INTEREST WAIVER, OR ANY OTHER CURRENT OR FUTURE BENEFITS APPLICABLE TO FEDERAL LOANS. CLICK HERE FOR MORE INFORMATION.
Student Loan Refinancing