December 30, 2018

Private Student Loan Forgiveness

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The average college graduate has more than $37,000 in student loans. Many times these loans include private student loans, especially if a student has exhausted all federal aid options. What happens when you can't pay those debts, though? Federal student loans have loan forgiveness programs available.

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What about private student loans? Is there private student loan forgiveness?

Can you get private student loans forgiven? Unfortunately, there is one problem with the theory of private student loan forgiveness - it doesn't exist. Unlike federal student loan forgiveness programs, you don't have many options to get out of your private student loans. You have to pay them or risk defaulting and ruining your credit.

Does this mean your hands are tied? Luckily, you have options - you just have to get creative. You don't have the help that the Department of Education provides those with federal loans. You operate on your own. The more knowledge you have regarding your options, though, the better the outcome.

Keep reading to learn how you can help yourself get out of your private loans.

Contact Your Lender About Private Student Loan Forgiveness

First, we suggest calling your lender. Just as is the case with any loan, if you have trouble affording your loans, you need to get in contact with the lender. Avoiding their phone calls or not initiating a phone call yourself can lead to trouble.

All it takes is for you to call the lender and be honest about your situation. Did your job prospects fall through? Did your initial salary not meet your expectations when you took out the loans in college? The more details and proof that you have to show the lender you are having trouble, the better your chances of getting help.

So what types of help might a lender offer?

  • Deferment or Forbearance: Each lender can make their own rules regarding the support they provide borrowers. For example, they may offer deferment or forbearance. This means the lender may agree to postpone your payments for a period. Each lender has their own rules regarding how you qualify for these options. Some lenders may require you to prove your financial inability to pay, such as unemployment or underemployment. Others may require you to make a good faith payment before they'll put your loan into deferment or forbearance.

  • Repayment Plan: Some lenders may offer a repayment plan based on your issue at the time. If your inability to pay the loan is temporary, they may offer you a little time without payments and then add the unpaid principal/interest to your payments after that time. Others may restructure your loan to help you make the payments more affordable.

Private lenders aren't required to offer you any type of help. But if you are consistent in your efforts and communication with them, they may be able to find a way to avoid you defaulting on your loans.

Other Options Aside from Private Student Loan Forgiveness

If your lender won't offer deferment, forbearance, or a payment plan, you may have to resort to other options. These options don't have anything to do with your current private student loan lender. Instead, they are "outside of the box" ideas to help you get a hold of your finances.

  • Refinance your private student loans: You may be eligible to refinance and/or consolidate your private student loans. You may qualify for a lower interest rate or a longer term. This can help make your monthly payments more affordable.

    Know the True Impact of a Refinance:
    Before you refinance your student loans, make sure you understand the full implication of the refinance in the long run. For example, if you extend the term, you will pay more interest because it will take you longer to pay the loan off in full. If you are able to get a lower interest rate and keep the same term, though, your final costs may be lower.

  • Check Out Options for Your Federal Student Loans Many students who have private student loans also have federal student loans. While we don't recommend refinancing your federal student loans, you may have options for loan forgiveness for these loans. You may also be eligible for federal student loan repayment plans. This may lower your monthly expenses, making it easier to afford your private student loans without refinancing or asking for special programs from your lender.

  • Increase Your Income You may have to find ways to increase your income. If you can't get a raise or find a higher paying job, consider starting a side gig or working part-time. Whether you work at your local coffee shop at night or you start your own freelance business, the extra cash can help you pay off your private student loans.

Statute of Limitations on Private Student Loans:
Each state has its own statute of limitations on private student loans. They range from 3 years to 10 years. This doesn't mean you don't have to pay the loan, though. You are still obligated. The lender just may not have the right to sue you for payment. Not satisfying your private student loans can ruin your credit and cause you financial distress long after the statute of limitations ends.

What Not to Do if You Can't Afford Your Private Student Loans

No matter how much money you have outstanding in private student loans or the issues that you've come across, there are certain things you shouldn't do.

  • File for bankruptcy: You may be able to write your private student loans off in bankruptcy, but it won't work in your benefit. Sure, you can eliminate the monthly cost of the loan, but at a large cost. First, the court will need to determine that paying the student loans causes you and your family undue hardship. That's not easy to prove. If you do get approval, a bankruptcy can remain on your record and possibly harm your credit for the next 7 to 10 years.

  • Default on your private student loans: Not paying your student loans is another bad decision. You could end up with a judgment, which could negatively affect your credit for the next several years. Even if you think you'll catch up one day, it can be nearly impossible to do so. Stay in touch with your lender and let them give you help.

Bottom Line

If you struggle with your private student loans, don't give up. Instead, get in contact with your lender. If you exhaust all of your options there, try to find an affordable way to refinance/consolidate your loans. Just ignoring your loans or assuming you can file bankruptcy, though, could affect you for many years to come.

More from CreditDonkey:

Student Loan Forgiveness

Obama Student Loan Forgiveness

National Student Loan Data System

Student Loans

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What is the best company to refinance student loans? Read this guide to compare interest rates and find out if it is still a good idea.

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