I Can’t Make My Private Student Loan Payments

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.

Loan Consolidation:
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.

6 Additional Tips: What to Do When You Can’t Afford Private Student Loan Payments

1. Check for Temporary Payment Relief (Deferment or Forbearance)

Even though you’ve mentioned that you’ve exhausted forbearance, it’s still worth double-checking your loan agreement or contacting your lender directly to confirm if there are any *other* relief options available to you. While it’s common for most private loans to limit the number of times you can use forbearance or deferment, some lenders may have emergency relief programs or specific hardship options available outside the standard terms. The lender may offer a temporary reduction in your payments or a brief pause on your monthly payments while you recover.

Pro Tip: When you contact your lender, be sure to be clear about your situation. Explain that you’ve been a responsible borrower and now face unforeseen hardship. This may encourage them to be more lenient with your request, especially if they value customer loyalty.

In the case of forbearance or deferment, keep in mind that interest may still accrue on your loan, and it could be capitalized (meaning the interest gets added to your loan balance). This can lead to more debt over time, so carefully weigh the pros and cons before going this route.

2. Explore Private Loan Consolidation or Refinancing

It’s unfortunate that your current lender has told you that your loans can’t be consolidated, but it’s worth noting that not all lenders are the same. Some private lenders will offer consolidation or refinancing options, even if others don’t. Private loan consolidation typically combines all your loans into one new loan, which can offer a lower monthly payment by extending your loan term. However, if you can’t make the new monthly payment, consolidation might not be the best option.

If refinancing is an option for you, it can help lower your interest rate or adjust your loan term, depending on your creditworthiness. This is usually a better route for people who have stable income or anticipate a quick return to work, as it helps them regain some control over their loan payments.

Pro Tip: While refinancing might sound appealing, make sure you’re comfortable with the new terms. Lower monthly payments could mean paying more interest over time, and if you’re consolidating loans that had fixed rates, you could end up with a variable rate that fluctuates with market conditions.

3. Contact Your Lender Directly—It Can’t Hurt

It’s not the easiest option to try, but one of the first things you should do in your situation is call your loan servicer directly. This is especially important if you’ve been diligent about making payments in the past. Lenders are sometimes more willing to work with borrowers who’ve kept up with payments in good times, and now face temporary setbacks. Being proactive shows them that you want to stay on top of things, and not just ignore your debt.

Try explaining your situation in detail: tell them about your injury, explain your current financial situation, and ask if there’s any way they can offer a temporary payment reduction or suspension. Some lenders may be able to offer you a forbearance option (even if it’s not advertised), or they might work out an alternative payment plan to help you stay on track while you recover.

Pro Tip: When you reach out to your lender, be sure to get everything in writing. Whether they offer temporary relief, a payment plan, or another option, make sure you have a written record of the terms they agree to. This way, you protect yourself if something goes wrong down the line.

4. Look into Alternative Forms of Assistance

In addition to contacting your lender, you might want to check with local nonprofit organizations, community groups, or government programs that provide financial assistance during hardships like yours. For example, some nonprofit credit counseling agencies might be able to offer free or low-cost guidance to help you navigate your options. Certain federal programs also offer assistance for borrowers in need, like disability assistance programs, although these are typically more relevant for federal loans. Still, it’s worth exploring every avenue.

Consider looking into unemployment assistance programs or any other temporary financial relief you might be eligible for in your state. While these won’t directly address your student loan debt, they could free up some cash flow, allowing you to continue making at least partial payments while you recover.

5. Bankruptcy as a Last Resort

Although it’s often viewed as a last resort, bankruptcy can be an option for borrowers who are truly unable to repay their debts. However, student loans (both federal and private) are generally very difficult to discharge through bankruptcy unless you can prove “undue hardship.” If you’ve already exhausted all your options for relief, and you truly believe that your loans are unmanageable, consult a bankruptcy attorney to see if this route is viable for your situation.

6. Consider a Financial Hardship Plan

If your lender isn’t offering much help, it may be time to consider working with a financial advisor or credit counselor to create a hardship plan. This plan might involve prioritizing your debt, looking at other expenses you can reduce or eliminate, and seeing if there’s any way you can free up cash to keep making at least partial payments. Although this is a challenging situation, getting professional help can make a big difference in regaining financial control.

Pro Tip: Many nonprofit credit counseling services offer free consultations. If you’re unsure where to start, reaching out to one of these agencies can help you understand your options and take some pressure off you during this tough time.

I know you’re feeling desperate right now, and I wish there were a simple, quick solution to take this burden off your shoulders. While private student loans can be a tough hurdle to overcome, you do have options available. Start by talking to your lender, and don’t hesitate to reach out to other organizations for support. Stay proactive, and keep in mind that financial hardship doesn’t have to be a permanent situation. You can rebuild, and there are people out there who can help.