Study loan

Get to Know Private Student Loan Repayment Options, Restrictions

Back in May, Sen. Elizabeth Warren, D-Mass., introduced the Bank on Students Emergency Loan Refinancing Act, a bill that would have allowed borrowers to refinance their private student loans into the federal loan program, under existing federal loan interest rates.

These loans would then be eligible for many of the lower payment and forgiveness benefits available to federal loan borrowers.

Despite a companion bill in the House, extensive media coverage and a respectable number of co-sponsors, the bill failed to move to a vote.

However, it gave many private loan borrowers struggling with their payments some hope.

After all, as those of you with private student loans know, they can be almost impossible to negotiate if you cannot afford your payments.

The Rules for Retail CreditPrivate student loans fall under a category called

retail credit, and all its associated rules and multiple state and federal regulators.

With very few exceptions, lenders of retail credit are not allowed to offer any programs or alternatives to a loan that would substantially alter the terms of the loan.

Ironically, lenders have a lot more freedom once the loan defaults. In the world of private student loans, the loan is considered in default or charged off after it becomes 120 days past due.

A charged-off loan is deemed severely past due or uncollectable on the books, but that doesn’t mean the borrower still doesn’t owe the debt.

Options for Private Loan BorrowersThere are a few things a borrower who is struggling

with private loans can do.First, take a long, hard look at your budget and sort

out the wants from the needs. Second, if you have federal loans as well, get that payment down as low as you possibly can via the lower payment options or even deferment. If you can do either of these, put that extra money toward your private loans.

If you do default on your private loan, it’s worth trying to talk to the lender as soon as possible to attempt to work out an alternative payment plan.

If you aren’t successful, it’s not a bad idea to send as much as you can per month, every month.

Unfortunately, a defaulted private loan is ripe for litigation, but that tactic can be very expensive and a collection agency is less likely to take that action on a borrower who is making a good-faith effort to pay.

Finally, if you have a problem with your private student loan, you can file a complaint with the Consumer Financial Protection Bureau.

It’s important to understand the terms and conditions of your private loan before signing on the dotted line.

The first bill is not the time to figure out that your Study loan payments are not affordable, especially when the alternatives are so few.

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