Education in modern society is essential. Many people take up federal students loans to pay for their tuition and school fees.
Sometimes repaying this debt can prove to be difficult for various reasons. People in this situation usually seek ways to appeal their loan debt. Many students are made to believe there is a private student loan forgiveness program. Well, the truth is this concept does not exist. While it is more or less impossible to acquire such assistance, other financing options are open to students.
This article aims to guide you through the effective alternative funding options available for students.
What are Private Student Loans?
Private student loans are pretty similar to federal college loans. Both loans generally grant the same purpose: financing your educational needs. However, the contrasting factor is that private student loans are funded by private organizations, online lenders, credit unions rather than the federal government.
They are credit-based loans that provide a financial platform for students to fund their college costs.
Private lenders often look for students or co-signers with good credit score. Having a good credit score is the first step in securing a private loan. Some are willing to reach a compromise for bad credit but at the expense of higher interest rates. Also, not all private parent lenders allow a co-signer, so the borrower must fulfill all the requirements to qualify for the loan.
The requirements of private student loans are not fixed and differ depending on the lender. Private lenders usually have their proposed terms and conditions and specific requests for certain credible documents. Before applying for these loans, you may want to check the interest rates, requirements, reimbursement conditions, credit limit, lender fee, and payment method. Students’ failure to consider these factors is often a significant reason they are unable to repay their educational debt.
Checking details such as the interest rates will give you an idea of your payment fee. This way, you can compare the fee alongside other budgets and income to determine your ability to pay your debt.
How To Seek Private Student Loan Assistance?
Private student loans are run by private lenders and do not have forgiveness opportunities. However, some methods can assist you in effectively managing your private student loan.
Here are some ways you can settle and manage private student loans.
Talk To Your Lender
Although private student loan programs may not provide the same benefits as federal parent loans, some lenders still offer borrowers a certain level of consideration and assistance.
They have platforms for borrowers struggling to pay their debt. They might provide you with the option to suspend your payment plan or move it to a more comfortable period. Other options may include:
- Adjusting your loan
- Accessing private student loan consolidation
- Reduction of loan payment
- College Ave
- Income-based repayment
If you have difficulty paying your loan, contacting your lender is often the first step you should take to find out their assistance. Most lenders grant various private student loan repayment programs to help borrowers with financial difficulties.
Also, keep in mind that any delinquent payment will reflect in your credit history and negatively affect your credit score. Therefore, you should reach out to your lender before the payment deadline to avoid hurting your credit score. If you have a co-signer as part of the borrowing terms, any late payment or a breach in the contract will also affect their credit score.
Students are encouraged to check if their lenders have any alternative repayment options before taking the loan.
Check your Credit Score
Most students are often left with unfavorable private student loans due to a poor credit score. You stand a better chance of securing private loans with more accessible terms and lower interest rates with a good credit score. Late payments on your loans will appear on your credit history and invariably hurt your credit score.
Debt settlement is a viable and affordable way of eliminating negative items from your credit report that may be hurting your credit score.
For private student loans that are difficult to settle, you can use debt settlement to erase errors from your report and improve your credit score. This will allow you to apply for favorable student loans or qualify for a loan repayment assistance program.
Each person is entitled to a free credit report annually, so feel free to request yours from one of the three primary credit agencies.
Consider Refinancing
If you are interested in paying off your loan as quickly as possible, refinancing your private student loan is the best option for you. You get a reduced repayment period and a lower interest rate on your monthly payment fee by refinancing your loan to a shorter term.
Refinancing allows you to collapse or extend your payment plan depending on how you choose to pay your loan.
If you do not want to run the risk of late payment, you could stretch the payment plan to an extended period. This strategy will allow you to spread your repayment plan over a more extended period, giving you a relatively reduced payment fee.
For instance, if you got a $50,000 private student loan with 7% interest and a 10-year repayment period, you could refinance the loan to a shorter period. With a refinanced loan at a 7-year repayment term and a 5% interest rate, you get to save over $10,000 on principal interest charges. You will also end up paying off your loan three years earlier than the original date.
However, refinancing your private loan for a longer period comes at the cost of a higher interest rate.
Also, if you have a deferred loan pending, refinancing allows you to pay off your old private with a new loan. With this method, you can focus on repaying your new loan with a much more comfortable repayment term.
Check out Repayment Programs Available
Some exclusive private loan repayment benefits are available to people in certain areas, states, or countries. You may be eligible for some loan repayment programs depending on your location and place of residence.
One way to benefit from these repayment schemes is to relocate to an area that offers loan assistance programs to its residents. You must also be willing to meet the requirements and conditions attached to programs. So do not hesitate to check with your state department of commerce if there is any loan repayment assistance program in your area. You might be lucky enough to find one.
Apply for Federal Student Loans
Private student loans aren’t the best option for financing essential educational needs. Students often find it challenging to pay back these loans with the high-interest rate and repayment fee. You should only consider private student loans as a last resort. There are federal government loans you can apply for. These loans come with lower interest and considerable payment fees.
Also, most federal student loans do not require a credit history or a co-signer to qualify for the program. Overall you get more considerable benefits on federal loans than private student loans. You can work on securing a federal student loan to pay off your private student loan. Since the interest rates and repayment plan are favorable, you will find it easier to pay your debt.
Conclusion
So far, we have established that there is no forgiveness benefit in private student loans. However, you can employ other alternatives to help you deal with settling your debt. Your credit score is also a vital aspect that allows you to qualify for better education funding.
