Why Most Student Loan Advice Does Not Apply to Your Private Loan

You have probably done the late-night searching. Income-driven repayment. Loan rehabilitation. Forgiveness programs. And then the fine print, every single time: federal loans only.

If you have a private student loan in trouble, most of the student loan advice on the internet was not written for you. That is not your fault. You are shopping in the wrong aisle, because almost everyone writes about the federal aisle.

Here is the honest difference. Federal student loans come with a safety net built by law: income-driven plans, deferment and forbearance rights, rehabilitation programs that can undo a default, and forgiveness paths. Private student loans are contracts with private lenders. There is no federal income-driven repayment, no federal forgiveness, and no federal rehabilitation program for them.

So what’s out there for a bad private loan? A menu, albeit shorter.

Hardship programs. Some private lenders offer temporary payment reductions or pauses. Ask your lender what it offers, and ask in writing.

Negotiation and settlement. Once a loan is seriously delinquent or charged off, the owner of the debt may accept a payment plan or a reduced payoff. Get any agreement in writing before you pay anything.

Refinancing, including after default. Most refinance lenders require good credit, which locks out the people who need help most. Specialized options exist, and some borrowers with defaulted or charged-off private loans may qualify to refinance into a new loan.

Bankruptcy, as a last resort. Private student loans are far harder to discharge in bankruptcy than ordinary debt and often survive a filing. If your situation is severe, talk to a bankruptcy attorney about your specific case.

The takeaway: stop measuring your situation against federal advice that was never written for you. Your loan has its own map.

If your private student loan is in default or has been charged off, you may qualify to refinance it. Checking your options is free, and GradMerge never charges you a fee. Check My Options at gradmerge.com/get-started.

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Further reading

• Student loans — Consumer Financial Protection Bureau
• Getting out of default — Federal Student Aid

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