Student loan debt in the United States is at a record high. The U.S. has over $1.48 trillion in student debt, along with an 11.2% delinquency rate.
These statistics include both federal student loans and private student loans. According to a report by the Institute for College Access and Success in 2016, the private student loan debt for 2014-2015 was $7.8 billion.
Now the issue with this is that private loans often come with higher interest rates than federal student loans. And, private student loans offer fewer payment plans and no forgiveness programs.
Even though these programs don’t exist, you don’t need to feel completely stuck. There are options for you. Here are some alternatives to private student loan forgiveness programs that can help you with your private loan debt.
What to do if you need private student loan forgiveness
1. Discuss Your Options With Your Lender
Talking to your lender should be your first step if you are struggling to deal with private student loan debt. Although they likely won’t offer private student loan forgiveness, it’s possible they may still be able to help you. Each lender varies in many ways, so you’ll need to discuss all your options with your specific lender.
Many student loan-refinancing companies offer deferment or forbearance. Both of these options allow you to temporarily postpone your payments. While this doesn’t take away from the original amount owed, it gives you time to get on your feet financially and lets you avoid delinquency.
Unfortunately, your deferment or forbearance can only last for a limited amount of time. To understand how long of a deferment or forbearance period you can have, discuss with your lender as it may vary.
2. Optimize Your Federal Loans
Although private student loan forgiveness programs don’t really exist, this doesn’t mean you can’t get any help. If you have both private and federal student loans, this option is worth considering.
If you have federal loans, you likely know that they come with a wide range of repayment options to help you if you are struggling. Utilize these options to lighten the burden of your monthly federal loan payments. If these payments are lowered, you will have more cash to hopefully make it easier to pay down your private student loans.
Paying down more of your private student loans follows the “debt avalanche” payoff method. In the “debt avalanche” method, you are encouraged to first target high-interest rate debt. Any extra payments should go to this high-interest rate debt, while you make only minimum payments to lower interest rate debt. Once your target account is paid off, apply the money you would have used for that account’s payment to your next target account’s minimum. Then just continue this process until all of your debt is paid off.
This “debt avalanche” method works as it reduces the debt that costs you the most over time first. It also lets you gain momentum in your payments. Once one account is paid off, that account’s payments are rolled over to another account. Soon, that will be paid off much faster, and the process continues.
If you’re still wondering how this applies to your student loans, here’s an explanation:
- If you are struggling to make all your payments, you can use an income-driven repayment plan to reduce your federal monthly loan payments.
- Then, apply the difference you were paying on your federal loans before this repayment plan to your private student loans.
- Because of the income-driven repayment plan, you will be able to keep up with your federal loans by paying the new minimum from the plan. And meanwhile, you will also pay down higher interest private student loans more quickly.
Since private student loans tend to come with ahigher interest rate, targeting them first lines up with the debt avalanche method nicely.
3. Refinance Private Student Loans
Refinancing your loans doesn’t change the principal amount of private student loan debt you owe, but it can make it easier to manage your payments.
When you refinance your loans, you can combine all of your different loans. Because of this, if you qualify for a better interest rate than you currently have, you can decrease monthly payments.
And depending on your refinancing lender, they may give you other ways to help. Some lenders for example, offer extra benefits like unemployment protection. This option helps you temporarily postpone your payments if you are involuntarily unemployed. Be sure to explore with your refinancing lender to see what your options are.
4. Find Ways to Increase Your Income
This method doesn’t have anything directly to do with private loan forgiveness. But it is important to mention just because of the significant impact it can have on your student loan repayment.
If you are not eligible for a raise in your current job, or you don’t have time to work more in that job, considering looking into doing work on the side.
There are many options when it comes to working on the side, you just need to assess your skills, how much time you’re willing to devote, and what you want to be paid. There are options like freelancing, being a brand ambassador, and tasks as simple as house or pet sitting.
If you, for example, get into freelancing and make an extra $400 each month for student loan payments, this can make an impact on your finances. This is an example of just how much of a difference it could make:
- If you have a current loan balance of $35,000 with an interest rate of 5.00%, a single, extra $400 payment will save $243 and take one month off the entire life of your loan.
- If you paid the $400 from your side job each month for a year on your loan, you will have saved $2,657 in the long run and paid off your debt 19 months early.
It’s clear that increasing your income can have a significant impact on your financial situation. Having a side job can put you in a better place financially, even if it just means making ends meet.
And in addition to this, you never know where a side job may lead. Aside from earning extra money, you can also build your network and improve various skills.
5. Keep Up with Updates On Private Student Loan Forgiveness
The concepts, rules, and regulations of student loan debt is constantly changing. Laws regarding this kind of debt change rapidly.
Our current administration has not yet made any moves to create a private student loan forgiveness program. In addition, there are actually proposals to reduce benefits for student loan borrowers than there are to add any.
Even though this is the case, those laws are not yet official, and there is still hope for positive change for student loan borrowers. And you have a right to use your voice and contact your own local representatives about the laws that are up for vote regarding student loan borrower benefits.
When private student loan forgiveness is possible
With college loans being at an all time high and no forgiveness programs for private student loans, many people find themselves struggling to keep up with their payments. But if you’re worried that you can’t pay off your private student loans, know that you do have many options available to you to make it doable. These options along with speaking to an expert, can really help you get in control of your student loans. You can contact an expert at aleevly.com to learn more about your options.