So I have private loans and a few federal loans my month payment currently is for all my loans is about $1000. My employer has been helpful by letting me work OT to make this happen. Currently working 12 hours of OT a week. But that is about to end, they are working on eliminating OT for all employees. So that will drop my money to allow me to pay only $779. The problem is about the $1000 is all the lender told me I could get my payment lowered. I would not pay any less to my federal because they seem more important but my private loans will take a hit.
I am looking for direction, I got no help from the lender, and wondering what would happen is I just paid a little but not full payment to each private loan. Will the payment still go to default?
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I applaud you for understanding the overtime solution is not sustainable and will collapse at some point, leaving you stranded on payments you can’t afford. So many people don’t look forward enough to see those issues brewing.
The partial payment strategy does not solve the problem. You will probably be charged a late fee and you will move towards default, but just a little slower.
Private student loan lenders are not required to make any payment affordable. They don’t have to adjust the payment and they can hold you to the original payment you agreed to when you took out the loan.
That being said, private student loan lenders often allow someone to defer payments or pay a lower amount. That actually just causes your loan balance to grow exponentially. They will be tacking on interest to the unpaid balance. It is so ironic that people jump for the deferred payment option when they can least afford to pay the loan but it just makes the unaffordable loan bigger still.
You have a few logical options.
- You can clear the decks of any unsecured consumer debt you may have to make room for your full student loan payments. To do that you should talk to a local bankruptcy attorney. And in fact, some of your private student loan debt may be easily discharged in bankruptcy. Read this for more information.
- You can get your federal student loans onto an income based repayment program and lower the payment to make more room for the private student loans. See my guide on low payment programs here. But beware, these low payment solutions can be a trap if not used correctly. Please read why, here.
- If the private student loans are simply unaffordable, you might just have to default completely. Defaulting is not the first strategy but it does have some benefits. Read this article on the top ten reasons to default on your private student loan.
There are some new federal repayment options coming out soon. If you’d like to be notified about them I would suggest you subscribe to and watch my email newsletter. You can subscribe here.
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