Quick Answer: Private student loan lenders like credit unions aren’t required to modify payment terms, unlike federal loans, leaving borrowers with limited options for the $658 monthly payment on this $70,000 loan at 9.5%. Parents should avoid draining retirement funds since this won’t solve the underlying affordability problem.
“Dear Steve,
Too much student debt and banks wont help.
My son has a few student loans. One of them is from a credit union with an interest rate of 9.5% The payments are $658 for the next 25 years!! We have asked them to lower the rate, so he can make the payments, but they said they can’t.
Every weekday I read the enforcement actions, filings and fine print the outlets skip, and turn them into the one or two moves that actually improve your position — a rate worth moving for, a fee you can refuse, a deadline to beat before it costs you.
In the latest issue (Oct 8): A parent's nursing home bill can become yours
I write Your Money Actually most weekdays — actionable money information you will not find anywhere else, and the small decisions that compound. It is free, I sell nothing, and I take no money from any company I write about.
My husband and I have taken money out of our retirement,to get him caught up, but this payment is too high for him to make and we are running out of retirement funds to help.
The Daily Money Brief — Free, at 10 AM
Money you may be owed, scams to dodge, and the fine print decoded — the consumer money news that affects your wallet, every weekday.
We have told the credit union he can’t make the large payment, but it falls on deaf ears. Any suggestions??
Molly”
Dear Molly,
Private student loan lenders are currently not required to make loan repayments affordable. Unlike the federal government, they do not have to modify the terms or let him have lower payments. It is what it is.
I have no idea what the total amount of debt your son has in student loans but working the math backwards it appears the Credit Union loan alone is for about $70,000.
A 9.5% rate for a student loan is not a horrible rate considering he’d have to refinance it to move it to a new lender.
It might just be your son can’t afford the cost of maintaining his loans and he might have to default and face the consequences. Clearly, draining what little money you have saved for retirement is not a good option. If you keep spending what little money you have left it will just take the last of your money and not solve the problem.
So many students are obligated for student loan debt they can’t repay because they either never graduated or never found jobs paying enough to service the loan payments.
While there are some companies out there who refinance student loans like CU Student Loans or SoFi, depending on his income situation the rate could be nearly as high as he is paying now or the lender would require you to cosign and be 100 percent responsible for the debt.
SoFi says their maximum rate is currently fixed at 7.24% but they only go out for 20 years so at that rate the payment would be about $564 a month. The CU Student Loan calculator said that with his assumed fair credit it would not be worth refinancing.
I’m not confident that lowering his payment on this loan from $658 to $564 suddenly makes his overall situation substantially more affordable. What do you think?
Please post your responses and follow-up messages to me on this in the comments section below.
Dealing With Debt? Understanding your options is the first step. See how all your debt relief options compare — including ones most sites won’t tell you about. The Find Your Path quiz gives a recommendation based on your actual numbers, and the Scam-O-Meter checks any company’s complaint history before you sign. Federal Reserve research shows bankruptcy filers recover faster than those who don’t file.
