Q: I am out of work with an injury, and can no longer afford to pay my private student loans. There is no forbearance left on my loans, I am desperate for help. Any ideas? My private loans can’t be consolidated, or this is what the company is telling me. I have no idea what is the next step?
A: Private student loans are currently one of the most restrictive forms of debt an individual can have. Unfortunately, these types of loans offer few repayment options or programs for individuals facing an economic hardship, and they can rarely be discharged in bankruptcy. For those who are unable to make their private student loan payments, the only available options are typically one of the following:
Deferment or Forbearance:
If you are unable to make your private student loan payments because of a situation such as unemployment, you may choose to utilize the deferment or forbearance options associated with your private student loan. This is typically a deferment of your monthly student loan payment for a period of up to 6 months, during which interest is likely capitalized. Each lender has different rules associated with forbearance and/or deferment, including how many times the loan can be placed in deferment or forbearance, and for what duration of time.
There are still some lenders consolidating private student loans for individuals who qualify. Consolidating your private student loans into a new consolidation loan may extend the repayment period of the loan, and therefore provide the individual with a lower monthly payment and/or a lower rate. However, a consolidation loan will only help individuals who are able to make the new monthly payment associated with the consolidation loan (repayment will begin immediately), for individuals who are unable to make any monthly payment, a consolidation loan will be of little help.
Contact Your Lender This option is a long shot, but for individuals who had been diligent about making their monthly payments before they encountered their economic hardship, it is always worth contacting the lender, explaining your situation, and asking them what (if anything) they may be able to do to help.