When you’re struggling to make ends meet, your student loan payments can feel like the heaviest ball and chain weighing down your finances.
If you have federal student loans, there are many options for lowering or pausing your payments. You can opt for an income-driven repayment plan, deferment, or forbearance.
But what if you have private student loans?
If you’re interested in learning how to lower private student loan payments, have a look at your options and which strategies work best. Specifically, let’s review these topics:
- Comparing federal vs. private student loan payments
- Lowering payments with forbearance or deferment
- Contacting your lender to afford loan payments
- Ways to lower private loan payments on your own
- Creating a strategy with your lender moving forward
Federal vs. private student loan payments
Remember, not all student loan lenders are created equal. Especially if you compare private and federal student loan lenders.
Federal student loans are originated by the Department of Education and come with standard benefits and protections.
Usually, banks and other private financial institutions provide private student loans. And since private student loans are offered by various lenders, there is no standardized protocol for dealing with payments. In other words, each lender might do things a little bit differently.
No matter where you stand on debt, though, it’s important to come up with a good debt repayment plan to help you reduce what you pay and get your bills under control.
Lower private student loan payments with forbearance or deferment
If you’re wondering how to lower private student loan payments, consider deferment or forbearance.
Both of these measures allow you to temporarily postpone your student loan payments for different reasons.
For instance, Sallie Mae, a popular private student loan lender, offers a deferment for borrowers going back to school or pursuing an internship or residency. There’s also a forbearance option if you run into financial difficulties.
Both deferments and forbearance are usually offered by private lenders under specific circumstances.
|For more, check out: Private Student Loan Options That Let You Pause Payments|
It’s important to note that interest usually continues to accrue on your private student loans while they’re in deferment or forbearance.
Contact your lender if you can’t afford private student loan payments
If you are trying to come up with a strategy for how to lower private student loan payments, consider contacting your lender.
“Borrowers who are struggling financially should contact the lender to ask about their options for financial relief,” Mark Kantrowitz, a leading student loan expert, told Student Loan Hero.
And if you’ve defaulted on your private student loans or are at risk of defaulting, you should ask your lender about any alternative payment plans they offer.
These plans may be considered on a case-by-case basis. To avoid student loan default and any other issues down the road, consider ways you can keep your loans in good standing by making the payments you can after more pressing matters are taken care of.
Unfortunately, private student loans don’t usually come with income-based repayment options or forgiveness options like federal loans. Additionally, private lenders don’t offer as many flexible repayment options as federal student loans.
“Private lenders have no obligation to offer these options on private student loans, but do so because it is more profitable to have a borrower who is current than a borrower in default,” Kantrowitz said.
If you can’t afford private student loan payments, get in touch with your lender as soon as possible, and discuss your options. It’s better to communicate and be proactive, instead of risking default, which could affect your credit score.
How to lower private student loan payments on your own
Aside from what your lender can offer you, there are other things you can do to improve your situation:
- Opt for a bare-bones budget
- Prioritize earning more income
- Apply for autopay or auto-debit
- Seek out loan repayment assistance programs
- Refinance your private student loans
Opt for a bare-bones budget
A bare-bones budget is a budget that focuses only on your needs, such as food and shelter.
It’s not necessarily fun to cut back on certain things just to pay back your student loans. But if you want to avoid default, your budget is the first place to look.
Prioritize earning more income
Yes, it’s easier said than done but investigate side hustles and entrepreneurial pursuits that could increase your earnings. You might also consider asking for a raise, seeking a promotion, working overtime, or adding a second job.
Apply for autopay or auto-debit
This is an additional way to save some money on your student loans. This can lower your interest rate by 0.25 percent points with the majority of private student loan lenders.
Of course, you only want to do this once you can truly afford your student loan payments. Otherwise, you could be hit with an overdraft fee or insufficient fee instead.
Seek out loan repayment assistance programs
Loan forgiveness isn’t exclusive to federal loans, as there are many state- and employer-based programs that help private loan borrowers repay their debt. Just keep in mind that these programs are typically meant for borrowers in certain career fields or locations who may be willing to work.
Refinance your private student loans
Another way you can lower your private student loan payments and make them more manageable is to refinance. By refinancing student loans to a longer term, you can reduce your monthly payments, creating breathing room in your schedule.
Additionally, in some cases refinancing — even to a longer-term — can save you money if you get a lower interest rate.
However, in order to refinance your student loans, you need to meet the credit and income requirements set by the lenders. This is another type of private student loan that replaces your current debts with new loan terms that might be more manageable in your situation.
If you are unable to lower private student loan payments, you may wonder if you can opt for bankruptcy to help you start fresh.
While getting your private student loans discharged in bankruptcy court isn’t totally impossible, it’s pretty rare.
“It is almost impossible to get student loans discharged in bankruptcy,” Kantrowitz said. “Doing so requires demonstrating that the student loans represent an undue hardship on the borrower and the borrower’s dependents in an adversarial proceeding.”
“A very small percentage of borrowers are successful in getting their student loans discharged in bankruptcy,” Kantrowitz added.
Create a strategy with your lender moving forward
If you want to learn how to lower private student loan payments, the first thing you need to do is contact your lender and discuss what options are available for you.
And if you truly can’t afford your loan payments, look at your income and expenses to see if there are changes that can be made.
Ultimately, it’s important for you to stay in touch with your lender and pay what you can to avoid default at all costs.
If your lender is unhelpful or if you’d like more direct help, consider hiring a no- or low-cost student loan counselor or lawyer.