While your private student loan seemed like a good idea when you were pursuing a degree, now it might feel like an unbearable weight — especially if you didn't get the job or paycheck you were hoping for after graduation. If you are struggling to pay your student loans, know that you are not alone: American grads share over $1.48 trillion in student loan debt, with a delinquency rate of 11.2 percent.
Private student loans add an extra layer of difficulty for borrowers. While federal student loans offer various repayment programs to those struggling to make payments, private loans notoriously have less leeway.
Not paying back your student loans is not an option. Not only can defaulting on your student loans hurt your credit score, but it can eventually lead to calls from collection agencies and having your wages garnished. Here are several options to consider instead when you are struggling with your private student loans. (See also: What Really Happens When You Don't Pay Your Student Loans)
1. Refinance your loans
Are you paying a lot of interest for your student loan? Get quotes from private student loan lenders to see if you can land a lower interest rate. Decreasing your interest rate by 1 percent might not save you a lot each month, but it can save you thousands over the life of your loan.
If you are really in a pinch financially, and you have exhausted your options, you can refinance your student loans to a longer term. This can dramatically decrease your monthly payment, but it will mean that you are paying more overall over the life of the loan. Consider the long-term effects of refinancing your loan from a 10-year term to a 20-year term before finalizing that decision. (See also: Should You Refinance Your Student Loan?)
2. Increase your income
Earning more at work can help ease your budget woes. However, getting a bigger paycheck is easier said than done. For employees that have been on the job for a while, ask for a raise or look for opportunities for in-house promotions. Many companies like to hire current employees for higher positions because in the long run, it is more cost effective and timesaving for the company. Don't see a new job listing? Don't let that stop you from asking your employer. They might be too busy to post a new job listing. (See also: How to Negotiate a Raise Out of the Blue)
3. Look for jobs with student loan repayment perks
Many companies are starting to offer student loan repayment options as an employee benefit. Companies like Staples, Fidelity, and Aetna offer this perk, so it might be worth looking at job listings with these companies. (See also: These 17 Companies Will Help You Repay Your Student Loan)
4. Find a side gig
If you can't increase your income through your regular paycheck, try earning money on the side. There are many avenues for earning extra cash through a freelance or side gig; you just have to find the right fit for you and your schedule. Driving for Uber or Lyft, housesitting, or dog walking are all easy ways to earn extra income each month. For those with more specific experience, try freelance writing, social media managing, or virtual assisting. (See also: 14 Best Side Jobs For Fast Cash)
5. Sell unused items
You might have extra money taking up space in your closet or garage. Go on a decluttering mission this weekend and find everything you don't need or want anymore. Sell smaller, valuable items, like a name brand sweater, on eBay. Sell larger items on Craigslist or Offerup. For everything else, sell in a yard sale. People buy junk at yard sales, so don't be surprised if your old towels or comforter set fetch you a few bucks. (See also: 12 Garage Sale Items That Sell Like Hotcakes)
6. Get real about your budget
If you can't find room in your budget for your student loan payments, it might be time to get a new budget. Take a hard look at what expenses can be cut. This can be a painful exercise, but if it means being able to stay current with your student loan bills, it is worth it.
Cut the fun stuff from your budget first, like coffee runs and shopping trips. Downsize your cellphone and cellphone plan and cancel any monthly subscriptions. This includes magazines, Netflix, gym memberships, and anything else you can live without.
If you still cannot afford your student loan payments after cutting out the fun stuff, it may be time to adjust your way of living altogether. As hard as it may be, consider ditching your car with a car payment for an older vehicle that can be bought with cash. Live with a roommate or move back home temporarily while you get ahead on your debt.
Paying off private student loan debt is a huge chore and making the sacrifices to do it can seem impossible. However, it is better to live with your parents or a drive around town in a clunker than to be delinquent on your student loans. (See also: 5 Ways to Pay Off Your Student Debt Faster)
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FAQs
First, start finding out your options
What happens if you can't pay private student loans? ›
If you're unable to make your private student loan payments, the lender can report your default to consumer reporting agencies, which could harm your credit. They may take different actions to collect the debt.
How can I get rid of private student loan debt legally? ›
How to get rid of private student debt. One of the few ways to get rid of private student debt is through discharge bankruptcy. It's an arduous — and expensive — process. You'll have to file Chapter 7 or Chapter 13 bankruptcy, then file an additional lawsuit known as an adversary proceeding.
How to get your private student loans forgiven? ›
Private student loans are only forgiven when the borrower becomes permanently disabled or dies. Your relief options will depend on your lender and loan agreement. Contact your lender and discuss your financial situation before defaulting on your student loans.
Can I negotiate private student loan debt? ›
Absolutely. But before you begin negotiating, your loans will probably need to be either in default or near default. Some lenders may suggest an alternative repayment plan, but if your loans are far beyond hardship assistance, you can start trying to negotiate a student loan settlement.
Can I ignore private student loans? ›
While the government doesn't have to take you to court to collect federal student loan payments, private lenders do. Depending on the terms of your loan, you could be in default after missing just one payment. Private lenders can sue you to collect payments.
Will private student loans ever go away? ›
Private student loans don't go away unless you pay them off, but in most cases, they'll fall off your credit report after seven years. But keep in mind that lenders can still contact you to collect an old debt, even if it's decades old and they can no longer take you to court over it.
Is there a program to cancel private student debt? ›
Navient, a large owner of private student loan debt, has created, but not publicized, a program that allows borrowers to apply to have their loans forgiven.
Can you be sued for private student loans? ›
Private student loans have a limited time to sue you.
Not only can the government file a lawsuit against you, but also to take administrative steps to force you to pay without using the court system. Private student loans, however, aren't covered by federal student loan laws.
Can you write off private student loans? ›
Student Loan Interest Deduction
You can take a tax deduction for the interest paid on student loans that you took out for yourself, your spouse, or your dependent. This benefit applies to all loans (not just federal student loans) used to pay for higher education expenses. The maximum deduction is $2,500 a year.
Private student lenders, like most businesses, offer a service in order to turn a profit. Lenders provide money to borrowers in exchange for interest fees, and forgiving loans would lead to lost profits for these companies.
Can private student loans be converted to federal loans? ›
No, there is no way to change private student loans to federal loans. However, you can refinance your private and federal loans together, ideally to qualify for a lower rate or better loan terms.
How to defer private student loans? ›
Whether you're requesting a deferment for a federal or private student loan, you'll need to provide your lender with documentation that you're eligible for a deferment, such as proof of unemployment benefits. If you qualify, your lender has to grant you the deferment.
How to pay less on private student loans? ›
First, ask about lower payments
But reputable private student lenders will work with you to make a plan to stay out of default. Write up a budget that cuts back on other expenses where you can. Gather documentation like pay stubs, bank statements, and bills. Call and ask if they offer options for reducing your payment.
Can private student loan debt be discharged? ›
Yes. Student loans can be discharged in bankruptcy, but it isn't always easy. This is especially true for private student loans. Student loan debt is an unsecured debt, just like credit card or medical debt.
Can private student loans be garnished? ›
In the case of private student loans, or those not offered by the federal government, the creditor does not have any special wage-garnishing ability. The creditor must first sue you in court to obtain a judgment, and then they need to submit a court order to your employer with the details of the garnishment.
What happens if you don't pay back a private loan? ›
If you don't pay back a personal loan then you will default on the loan. This means that the lender may sell your debt to a debt collector. The debt collector will then take over responsibility for the owed amount and begin contacting you to collect the payment.
What happens if a private student loan goes into default? ›
If the student defaults on the loan, private lenders will often hire collection agencies to get you to repay, and they may also sue you in court. Lenders can also report your default to consumer reporting agencies, which could harm your credit.
What happens if you get sued for private student loans? ›
If you are sued, you usually only have a short amount of time to respond to the lawsuit by filing an answer with the court. If you don't file your answer on time, a default judgment may be entered against you. You usually can't appeal the default judgment if you just ignored the lawsuit.
Can private student loans be bankrupted? ›
Yes. Student loans can be discharged in bankruptcy, but it isn't always easy. This is especially true for private student loans. Student loan debt is an unsecured debt, just like credit card or medical debt.
