How to Lower Your Private Student Loan Payments?
17% of student loans for the class of 2018 were private with the total amount of student loan debt being attributed to private student loans reaching a whopping $13.1 billion that same year.
While federal loans are often a better choice for most students, those that need to take out more than the government or their university allows sometimes have to turn to private loans. And, seeing as they often come with variable interest rates and aren’t eligible for the Public Service Loan Forgiveness Program, they can take longer to pay off, too.
If you’re struggling to pay off your student loans, whether it’s due to the coronavirus crisis or not, here is how to lower your private student loan payments.
What to Know About Private Student Loans
Federal student loans make up a majority of student loans in the country. And, because they’re backed by the government, there are a variety of repayment plans possible and the process for repaying your loans or lowering your monthly payments is pretty streamlined.
However, because banks and other financial institutions offer private student loans, the process by which you can lower your monthly payments to look into deferment varies from place to place. It’s best to first contact your lender to find out what your specific options are.
Forbearance vs. Deferment
You’ve probably heard of these terms, but just what do they mean exactly? If you’re having trouble paying off a private student loan, you might look into forbearance or deferment. With deferment, you’re usually deferring payments for a longer period of time, often up to three years.
Forbearance, on the other hand, is a pause in your payments for usually only up to one year. With forbearance, your loans will also still be accruing interest even if you’re not having to make payments. Traditionally, this is not the case with deferment.
Deferment is used more by federal lenders and borrowers as a way to defer payments due to a specific event, such as going back to school or pursuing an internship or residency.
Speak with Your Lender to Lower Private Student Loan Payments
In March, following nationwide shutdowns due to the coronavirus crisis, Federal Student Aid announced that all federal student loan borrowers would automatically be placed in an administrative forbearance until September 30th, 2020. Unfortunately, this doesn’t apply to those with private student loans.
However, lenders are offering coronavirus aid and relief, so it’s worth speaking with your lender about your current financial situation to talk about your options. For example, those who have private loans through Sallie Mae don’t have to show any financial proof that they’re experiencing hardship in order to take advantage of the lender’s COVID-19 forbearance. While it’s no student loan debt forgiveness, it can help a lot during times like these.
How to Refinance Your Private Student Loans
If you have multiple student loans through various private lenders, you might also look into consolidating your student loan debt. This involves taking out a debt consolidation loan at a better rate than your current loans. Or, you can also refinance your student loans. The main benefit of refinancing is the fact that you could lower your monthly payments.
Interest rates are low right now, but it’s important to note that in order to refinance your student loans, you have to have a good credit score. And, it’s important to understand that by refinancing your loans, you’re not getting rid of you’re student debt; you’re simply taking out a new loan to pay off your existing ones. You’ll still have to pay off the new loan.
Stay On Top of Student Debt
Whether you have federal or private student loans, it’s important to stay on top of your student debt to avoid missing payments, accruing more interest, and hurting your credit score. Make a commitment to avoid taking on more debt (if possible) and adopt an aggressive repayment strategy that allows you to pay off your debt as fast as possible.
If you’d like a little extra help in terms of savings to allocate towards your student loan debt, look into something like a Cheese Debit Card that will allow you to enjoy zero fees when spending and also get cashback and saving bonuses. Sign up today to see how it can work for you.
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