In 2012, 71 percent of college graduates left school with student loan debt, according to the Institute for College Access & Success (TICAS). Unfortunately, due to rising tuition costs, many students are forced to turn to private student loans.
But private student loans have high interest rates and lack the same protections and repayment programs of federal loans. This can make it difficult to know how to get rid of private student loans.
However, while you may not be eligible for Public Service Loan Forgiveness or income-driven repayment plans, you can still get help with private student loans.
The problem with private student loans
Private loans can be an essential tool in completing your education. If you’ve run out of federal loans, grants, and savings, taking out a private student loan can help fill the gap and keep you in school.
But private loans are typically more expensive than federal loans. While federal student loans can have interest rates as low as 4.45%, private lenders can charge more than 11% interest. Such a high rate can cause your balance to balloon over time, adding thousands to your loans.
In addition, if you have a variable-rate loan, your payments can fluctuate along with your interest charges. That can make it difficult to budget accordingly each month.
How to get rid of private student loans
If you’re struggling with your loans, there are options available to you to make your payments more manageable or to discharge your loans altogether. Here are seven ways to get private student loan debt relief:
1. Forgiveness programs
Only federal loans are eligible for the government’s Public Service Loan Forgiveness program. However, depending on your location and profession, you may be eligible for assistance from your state government or private organizations.
For example, if you are a licensed medical, dental, or mental health provider, you may be eligible for up to $50,000 to repay your student loans through the National Health Services Corps Loan Repayment Program. To qualify, you must commit to working full-time for two years in an underserved area.
Student Loan Hero has identified more than 120 repayment assistance or forgiveness programs. You can use the program search tool to look for programs in your area or profession.
2. Interest-only payments
If you cannot make your full minimum payment, some lenders will allow you to make interest-only payments on your loans. Instead of a payment that goes to the principal and interest, you’ll pay only the interest that accrues each month. LendKey is one of the lenders that allows borrowers to enter into an interest-only plan for up to two years.
This approach can significantly reduce how much you owe each month, but keep in mind that you’ll pay more on your loan over time.
To get on an interest-only plan, contact your lender’s customer service department. Your private loan lender may offer this payment option.
If you’re facing a financial hardship, such as unemployment or a medical emergency, some lenders, including Connext, allow you to enter your loans into forbearance. That means you postpone making payments without going into default or delinquency.
However, interest will continue to accrue while your loans are in forbearance, so this should be a last resort when managing your loans. Make sure you understand all of the potential drawbacks of forbearance before applying.
4. Negotiating lower payments
Your lender wants you to keep making payments; they don’t want borrowers to default. So if you’re unable to make your payment each month, contact your lender and explain your situation.
If you’re going through a hardship, let your lender know. They may be willing to negotiate a lower payment for a limited time to help you get back on your feet. You can also try negotiating your interest rate. Some lenders offer interest rate deductions for setting up autopay, for example.
5. Disability Discharge
While federal loans are eligible for Total and Permanent Disability Discharge if you are severely injured and unable to work, private student loans do not qualify.
However, some private lenders will cancel a borrower’s debt in cases of permanent disability. There is not a set standard for this process, and it can vary from lender to lender. The best thing you can do is ask your lender if they offer disability discharge.
If you declare bankruptcy, you can cancel your debts, such as your credit card balance. In some cases, you may also be able to eliminate your student loan debt. However, getting private loans discharged through bankruptcy is much more difficult than with other forms of debt.
If you go this route, you must be able to prove an undue hardship, meaning you are incapable of paying back your loans while maintaining a basic standard of living.
Bankruptcy is a serious step that can have consequences that last for years, so it’s not something to enter into lightly. It also can cost you thousands in legal fees and court costs. Before filing for bankruptcy, make sure you have exhausted all of your other options.
If you need a lower monthly payment to make ends meet, another option is student loan refinancing. Through refinancing, you take out a new loan that covers the cost of some or all of your current loans. The new loan will have different repayment terms, such as length of repayment, interest rate, and monthly payment.
Some lenders offer repayment terms as long as 20 years. While you’ll pay back more in interest, extending your repayment period can make your monthly payment much more affordable.
While private student loans have fewer repayment options and benefits than federal loans, there are still ways to make your payments more manageable. If you are struggling with how to get rid of private student loans, contact your lender and explain your situation. Opening the line of communication can help you identify a solution and take charge of your debt. To learn more about your options check out aleevly.com. They have different programs that can help you get in control of your student debt.