Pinterest Student loans are tough, and they present borrowers with heavy debt burdens after college. But while there are a growing number of options available to consumers, most student loan forgiveness programs and other repayment plans are only available to those with federal student loans.
Borrowers who are having difficulty with private student loans, from lenders like Sallie Mae, have fewer options. Today we are going to take a look at the programs available to private student loan borrowers. We will analyze six of the top student loan servicers and give tips for how to pay off private student loans.
Note about the updates: Since we first wrote this post, more information about the top private lenders and their repayment programs has become publicly available. But times have changed and the student loan crisis, the media coverage surrounding it, and government intervention have worked to create an environment of improved transparency and increased options for borrowers.
As of February , the post now contains new information about the three lenders that were originally listed here Discover, Wells Fargo and Sallie Mae , along with details about other big private lenders. Federal student loans are well-regulated and have structured programs to help borrowers. Even when consumers do struggle or fall behind, there are numerous resources available, and these resources are guaranteed. Or, maybe you picked one who refuses to make any modifications or adjustments.
In most cases, private student loans loans are already harder to pay due to higher interest rates, and when consumers fall behind they have no program or resource to help them re-establish their footing. For many, the payments are too challenging. Of course, this issue has caught the interest of politicians and the Consumer Financial Protection Bureau.
There are Some Options Thankfully, there are some options available for your private student loans. First, we will cover options that lenders offer, and then we will highlight some other resources. Sallie Mae Sallie Mae handed off most of its older private loans to Navient after its split into two arms, but it still services loans, while also offering new student lending products.
In addition, it mentions its forbearance program, which can be used in three-month intervals for up to twelve months. This is certainly helpful for those who need it, although interest does accrue during the forbearance period and a collateral payment is required. Below are also some programs that Sallie Mae has offered in the past.
Traditionally, the borrower would then have to begin making monthly payments that include principal and interest. Under the GRP, the borrower only has to pay accrued interest for the first 12 months of repayment. This means that recent graduates have 18 months before being required to pay toward the principal. Like with many repayment programs, this can lead to higher payments later and a more expensive total loan amount, but it helps consumers get on their feet after graduation.
This is particularly important for those who struggle to find work. To qualify, borrowers must first make three consecutive on-time monthly payments at the reduced rate.
Sallie Mae also offers reduced monthly payments, extended repayment schedules and, likely, some less-advertised hardship programs. In their letter to the CFPB, they also state that they are in favor of rehabilitation programs for private loans that can help borrowers recover from default. Navient Navient, the sister company of Sallie Mae, now holds and manages many of the private loans that were previously managed by Sallie Mae.
Unfortunately, Navient keeps information about private loan repayment close to its chest. Again, the transparency and information provided to private loan borrowers is disappointing.
Navient does, however, make a point to refer clients to credit counseling. This is a good sign that they understand the fact that student loan debt is often just a part of a larger debt crisis. By working to get credit card debt under better control, borrowers will likely improve their overall financial situations and free up more money for their student debt. However, what would be even more helpful are innovative programs designed to help repay private loans, so we hope Navient makes this information more available soon.
Wells Fargo Student Loans For starters, Wells Fargo appears to have a generous forbearance policy for its private student loan borrowers.
Students who are interning, in a residency or fellowship, or enrolled less than half-time as a student might be able to qualify. However, the bank has also disclosed quite a few short- and long-term repayment options for struggling borrowers.
The main options include: An extended grace period of up to six months Short-term payment relief up to two months for borrowers with an on-time record Additional payment options if you are already past due Some of these are more vague than others, but it is clear that there are some options. The other, more significant program is relatively new.
The program allows certain borrowers to qualify for an interest rate reduction to make their payments more realistically affordable, based on their income. Here is additional information from the official press release: Through the program, Wells Fargo private student loan customers experiencing a hardship will have their financial situation reviewed on an individual case-by-case basis to determine eligibility for a short- or long-term loan modification, as appropriate.
Borrowers interested in this program or others offered by Wells Fargo are encouraged to call in at Discover Student Loans Discover offers a variety of options to borrowers. One of the most basic options is deferment, and Discover extends deferment options to members of certain occupations, including those who are: On active military duty up to 3 years In public service with certain organizations up to 3 years In a health professions residency program up to 5 years In addition, they offer an extended grace period, which is simply a three-month addition to your current grace period.
The other options include a payment extension the ability to catch up on missed payments , reduced monthly payment, forbearance, and a hardship program that involves an interest rate reduction. You can read more about the specifics of these programs and how to qualify , but be sure to read the guidelines from the CFPB below, too.
In addition to these traditional programs, Discover also has plans to launch a formal student loan repayment assistance program later this year. For starters, read this Wall Street Journal article which covers some under publicized programs being offered to borrowers at Discover and speculates about upcoming repayment options.
If you are a struggling Discover borrower, you may want to call in and inquire about these programs immediately. What I gathered was that there is a standard six-month grace period, but that PNC does have an extended grace period of six additional months. There is also a forbearance option, and all available forbearance time must be used before PNC will work with the borrower in a modification program.
A customer service rep who spoke with me on the phone recommended reaching out to those agencies to learn more about particular programs that may be available. She did, however, give me a number to call, but the representative on the phone only informed me of the same three options, along with what sounded like standard forbearance and grace period programs.
This one is worth some additional research, and we will update the post if we receive any new information.
The 1 Rule for How to Pay off Private Student Loans We have seen that private student loan companies offer a variety of repayment options that you may not have known about. While some lenders publish their repayment options publicly, others keep this information private. Luckily, more and more has become public since our first version of this article in Instead, it means that the most important rule about paying off private student loans is that you need to communicate with your lender!
As we have shown, most lenders are willing to help you and might have some sympathy for your economic difficulty. We encourage you to call early and often during your period of financial difficulty and to explain your situation thoroughly when you ask for help. CFPB Guidelines In addition to updates from the financial institutions, the CFPB has also taken a tougher stance and provided more guidance since we first wrote our article.
For example, our analysis of complaints reveals that many of you tried to find out more information by calling your lender or servicer, but received conflicting or inaccurate information as you were bounced between call center staff. Many of you told us how you were provided no option at all, driving you into default, even though a reduced payment plan might be in the best interest of both you and your lender.
One solution to this predicament might be to arm yourself with even more information when you make contact with your lender. Having the ability to present more concrete evidence of your financial standing could help you make a stronger case. Some student loan companies have told us that they may ask for recent pay stubs or a bank statement to verify income and expenses. Having these documents handy could pay big dividends, and offering them before they are requested could also get the conversation started.
Another important point is to keep in mind the power of physical mail. This is particularly challenging for millennials, who prefer electronic communication, but ironically they are the group most negatively impacted and frustrated by this private student loan debacle.
Overcome this concern and reach out via paper mail using this letter provided by the CFPB: Private Student Loan Hardship Letter. Download the letter, fill out the appropriate information, and send it to your servicer. Keep scanned copies of everything you send. This could be a powerful tool in getting a response, including some options that have not been presented to you via telephone.
If you try this approach, please come back and let us know how things turn out by adding a comment below. Other Resources for Private Student Loans If you are still struggling, there are two more options to consider. First, if you feel that your loan servicer has broken the agreement or terms of your loan, you can contact the Consumer Financial Protection Bureau. If you file a formal complaint with the CFPB , they may be able to help.
Secondly, you should leverage the flexibility of your federal student loans by enrolling them in repayment programs. In most cases, this will allow you to have lower monthly payments for your federal loans, and this will free up more money to put toward Sallie Mae or other private loans. Ideally, this will help you pay off your private student loan debt completely, and then you can focus on the federal loans.
One of the best ways to learn about federal student loan programs is by talking to a student loan counselor. Clearpoint offers this service, and a counselor will help identify your best repayment options, review your budget, and give insight into your credit. Where do you go from here? If you have private student loans, there are three key takeaways you should remember: Communicate with your lender s regarding your financial situation and use the CFPB letter. Get familiar with the available hardship programs offered by your lender, and contact the CFPB if the lender breaks your agreement.
Leverage the flexibility of your federal student loans. We hope you can put these strategies to work. For more information or help with your student loans, call us at or click here to schedule a student loan counseling session. Thomas Bright is a longstanding Clearpoint blogger and student loan repayment aficionado who hopes that his writing can simplify complex subjects.
You can follow him on Twitter. Try Our Student Loan Counseling A counselor can explain which options are right for you and make other personalized suggestions for your finances.