Private student loan debt can be a huge problem. These debts cannot be discharged through bankruptcy, and to make matters worse, private student loans are not eligible for income driven repayment or forgiveness options like federal student loans are.
Unfortunately, many people do not realize how hard it is to pay off a private student loan because of the false and misleading promises made by some for-profit colleges. Some of these colleges push private student loans on their students because they receive more money from them than federal student loans.
What To Do About Private Student Loan Debt?
Students with private student loans have several options. Not all of these options are right for every student, but most people can find a solution to private student loan debt in the list below.
Popular options for dealing with student loan debt include:
- Loan Refinancing
This means you take out another loan that pays off the student loan. To qualify you will need a credit score of at least 660 and a steady substantial income. Solvable.com can help you locate the companies that specialize in these loans.
- Debt Settlement
With debt settlement, you work out an agreement to pay off the loan with a lump sum or reduced payments. You can negotiate directly with your lender or hire a private loan settlement company.
A private loan settlement company has to be chosen carefully because not all of them are reputable or effective. There are some websites, such as solvable.com, that specialize in connecting you with settlement companies. Be aware that debt settlement can lower your credit score and it may not stop calls from debt collectors.
- Debt Dismissal
It is possible to get your student loan debt dismissed completely. For dismissal you will have to hire a lawyer and prove that the lender or the college made false or misleading claims regarding the loan. This is a fairly new process and it is not clear how effective it is.
- Pause Your Student Loan Payments
With this option, the student loan payments will stop for a short period of time by using a forbearance or deferment. Many private lenders do not offer these options and those that do will require proof of hardship, such as unemployment or loss of income.
Be aware that most lenders will still charge you interest even though your loan repayments are paused, so your loan payments will be higher after the payments resume. You may also have to negotiate with your lender to get a deferment.
- Consolidate Through The U.S. Department Of Education’s Income Driven Retirement Plans
It is also possible to consolidate private and federal student loans through the U.S. Department of Education’s Income Driven Retirement Plans. You will have to contact the Department of Education, or the lender that issued your private student loan, to see if this option is available.
- Private Student Loan Consolidation
This means that you work with a private lender that consolidates your loans, which can lower your payment and interest rate. To see how this process works and learn how low your payment might be, visit solvable.com.
Although there are many ways to reduce private student loan debt, not every one of these options is right for every student. Make sure that you carefully research your student loans and your options before taking action.