When you take out a student loan to finance college, you don’t have to make payments for 20 years. In fact, you can defer making payments for up to 25 years! This deferment feature helps you make the most of your education and career, but it can also make it harder to know when you should start making payments on a loan.
We here at Student Loan Planner are all about helping you manage your student loans. We’ve got guides on how to consolidate debts, the best ways to get a private student loan, and the best ways to save money on student loans. We’ve even got a guide on how to lower your private student loan payment.
Federal student loan borrowers have many protections and repayment options to help make payments affordable, like forgiveness options such as Public Service Loan Forgiveness, and a variety of income-driven repayment plans. But what happens if you need to lower your private student loan payments?
Private student loan borrowers might need to reduce their private loan payments for a variety of reasons. Maybe your income has recently dropped, and you can no longer afford your monthly amount. Alternatively, maybe you just want to free up money right now for other financial or personal goals.
Unlike federal loans from the government, private student loan lenders are under no obligation to lower your monthly payment. Once you sign the dotted line, you’re generally at the whim of your lender.
So, what’s a private student loan borrower to do? Read on to learn how to reduce private student loan payments.
Option 1: Restructure your existing private loan
If you’re struggling to afford your private monthly payment amount, your lender might be willing to restructure your existing loan.
Although they aren’t required to, some private lenders will work with you to choose a new, more affordable student loan repayment plan. This might also be the case if you’re at risk of defaulting on your loan. For example, some lenders may offer a graduated repayment plan where your payments start out lower and gradually increase over time.
Depending on the lender, they might propose other restructuring options like extending your loan term to a longer period of time or providing a temporary interest rate reduction.
A new restructured loan helps both parties because it keeps the borrower current on payments, and it keeps money flowing to the lender.
However, it could end up costing you more money in the end. For example, an extended repayment term or a temporary reduction of your loan payment will generally lead to paying more interest over the life of your loan.
Additionally, restructuring an existing loan usually won’t lower your interest rate, give you better loan terms or allow you to change lenders. This option should primarily be considered if you really can’t afford your payments and don’t have access to alternative options, like refinancing your private student loans.
Action step: How to request your loan be restructured
Start by calling your private lender and providing details about your situation. They might have alternative options if your financial situation is temporary, such as a forbearance or deferment period. But keep in mind that interest will continue to accrue during these temporary payment suspensions, so you’ll end up owing more money than before.
If you prefer a long-term solution, explicitly ask your loan holder to restructure your private student loan.
Keep in mind that each lender chooses what it deems as acceptable borrower relief. You’ll need to speak with your private lender directly to determine which restructuring options are available. Be ready to provide details, like your proof of income, if needed.
Option 2: Refinance your private student loan
If you want to lower your private student loan payment and are otherwise financially secure, you’ll probably be better off refinancing your loan.
Refinancing can reduce your monthly payment or lower your interest rate — or in some cases, both. You can often refinance your private student loans into a new loan with the same term, or you can choose a shorter or longer-term if it better fits your goal.
However, refinancing lenders typically have strict credit and income requirements, including a good credit score and payment history. If your finances aren’t in the best shape, you might still qualify with a creditworthy cosigner.
Student loan refinancing can also get you away from your existing private lender if you’ve previously had bad experiences with their customer service or have other complaints.
As an added perk, competition among refinancing lenders is at an all-time high right now. Therefore, the top refinancing lenders are offering huge cash-back bonuses.
Since you already have private loans, it’s best to check for a lower interest rate at least once a year or when your financial standing improves. You should also check when you see interest rates dropping due to economic factors.
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Action step: How to lower private student loan payments with refinancing
Here’s how to lower private student loan payments if you’re pursuing the refinancing route.
We recommend shopping around with at least three refinancing lenders to get the best interest rate and terms. Quickly compare multiple refinancing lender offers by using platforms like Credible or LendKey.
Alternatively, you can check rates with popular lenders like Earnest, CommonBond and Laurel Road.
We’ve written extensive reviews for each refinancing lender that details what to expect during the application process. We also include feedback from our readers’ experiences to help you make a more informed decision.
You can use the search bar in the upper-right hand corner to quickly get all the information about any refinancing lender you might be considering. You can also reach out to us directly at any time.
If you need to lower your student loan payment, take action now
If you’re having a difficult time affording your payment, the last thing you want to do is ignore the problem.
Contact your lender immediately if you’re struggling to make on-time payments. Temporary payment solutions, like forbearance or deferment, might be available depending on your lender. Additionally, restructuring and refinancing might be favorable paths to reduce your private student loan payments and avoid undue hardship.
You can also explore other financial changes to make your student loan payments less stressful. For example, you might need to reevaluate your budget to cut back on other expenses or consider taking on a side hustle to help you earn more cash for your student loans. You should also exhaust all repayment assistance programs for professionals through your employer or state.
Although your private student loan debt has fewer borrower protections compared to federal Direct Loans, you still have options. But you need to be proactive and address the situation head-on.
Frequently Asked Questions
Will private student loans settle for less?
Private student loans are not eligible for the same type of loan forgiveness programs as federal student loans.
How can I lower my student loan payments?
If you are struggling to make your student loan payments, there are a few options available. You can contact your lender and ask for a deferment or forbearance. You can also contact the Department of Education and ask for an income-driven repayment plan.
Does student loan forgiveness apply to private loans?
No, student loan forgiveness does not apply to private loans.