Private Student Loan Payment Too High? What Can You Do?
Updated: Sep 11
A borrower may have a private student-loan payment of $800, $1,200, $1,500 or more per month and discover that the lender offers nothing resembling a federal income-driven repayment plan.
That is one of the biggest differences between federal and private student loans.
Private lenders generally are not required to offer federal income-driven repayment programs.
But borrowers may still have options.
Start With the Loan Agreement
The first step is determining what the lender actually agreed to provide.
Review:
- the promissory note;
- repayment schedule;
- fixed or variable interest rate;
- maturity date;
- hardship provisions;
- deferment or forbearance rights;
- cosigner provisions; and
- any modification options.
Ask About Hardship Assistance
Some private student-loan lenders offer temporary assistance to borrowers experiencing financial hardship.
Depending on the lender and the loan agreement, options may include:
- temporary reduced payments;
- interest-only payments;
- short-term forbearance;
- modification of repayment terms; or
- an extended repayment schedule.
Any agreement should be confirmed in writing.
Refinancing May Help — But Look Beyond the Monthly Payment
A borrower with sufficient income and credit may be able to refinance a private student loan.
A lower interest rate can reduce the total cost of repayment.
But a lower monthly payment does not always mean the new loan is cheaper.
Extending the repayment term can reduce the monthly payment while increasing the total amount of interest paid over time.
Before refinancing, compare:
- the interest rate;
- fixed versus variable rate;
- repayment term;
- monthly payment;
- total projected interest;
- cosigner treatment; and
- any borrower protections that may be lost.
Consider the Cosigner
If a parent, grandparent, spouse, or other person cosigned the loan, missed payments may affect that person's credit and legal liability as well.
Some lenders offer cosigner release after the borrower satisfies specified payment, income, and credit requirements.
Borrowers should review the promissory note and ask the lender whether cosigner release is available.
What If the Payment Is Truly Impossible?
When a borrower cannot realistically maintain the required payment, additional questions become important:
- Is settlement possible?
- Is the loan already in default?
- Has the statute of limitations become relevant?
- Is there a lawsuit?
- Does the borrower have other overwhelming debt?
- Could bankruptcy provide relief?
- Is the particular education loan actually protected by Bankruptcy Code § 523(a)(8)?
These are very different questions from simply asking for a lower monthly payment.
The Bottom Line
If a private student-loan payment has become unaffordable, do not assume the only choices are:
“Pay the full amount or do nothing.”
Start by identifying the loan, reviewing the contract, and determining which options actually exist.
Depending on the facts, those options may include hardship assistance, refinancing, modification, settlement, cosigner release, or bankruptcy analysis.
For a broader overview of private student-loan strategies, see Private Student Loans: Your Legal Options When Payments Become a Problem.
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Need Help Reviewing Your Private Student Loans?
An individualized review can help identify the legal and financial issues that may affect your options.
This article provides general educational information and is not legal advice. Laws and individual circumstances vary. Reading this article does not create an attorney-client relationship.
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