Question:
Dear Steve,
I have about 96,000 in PRIVATE student loan debt. I got off to a rough start with payments when I graduated in 2011 but since late 2012 I have been paying faithfully and haven’t made a dent in the balance. I have written numerous times to Wells Fargo, Navient (first Sallie Mae) and AES (previously Chase) to ask for a reduction in my interest rate to no avail.
I have every intention to pay these loans back and really just need a way to lower the interest rate so that more of my payment would go to principal. I have tried loan consolidation and have been turned down numerous times.
All I am trying to do is find a way to make my payment go to the principal in order to get the balance down. I have a good job but the payment of over $1000 leaves me with little disposable income after car, food and rent.
Is there any kind of a program that would let me consolidate these loans at a lower interest rate to be able to pay them off?
Adam
Answer:
Dear Adam,
Unfortunately when it comes to private student loans there are not many good programs that will actually lower the already low interest rates.
Private student loans are a terrible problem for many people. It’s why I recently wrote Why Defaulting on Private Student Loans is Not as Crazy or Irresponsible as it Sounds.
If you can make your payments, you should make them, but the article goes into the myriad of issues that have led to the private student loan problem today.
You are not alone. I'm here to help. There is no need to suffer in silence. We can get through this. Tomorrow can be better than today. Don't give up.
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Have you tried looking at Earnest or Sofi? I just refinanced a few high interest rate (9.25+) private student loans with Earnest and couldn’t be happier. I was skeptical of the application process due to the fact that you have to provide them with a myriad of information related to your financial picture, however everything went very smoothly (FYI I changed my passwords to all my accounts I had to enter shortly after the approval process completed). By providing a complete picture of my financial situation, I actually received a much better rate, a reduction to my repayment period (roughly 5 years) and my payments are less than what they were on the loans previously. I also liked the fact that you can choose your rate depending on what you can afford to pay on a monthly basis.
Before applying to Earnest, I had actually applied to Sofi. However, I was not satisfied with the rate they offered taking my financial picture and good credit into account. Hence why I looked elsewhere and found Earnest. If you haven’t looked at either of those options, I strongly encourage you to. Having student loan debt hanging over your head and affecting your future financial decisions is not fun. Best of luck to you.
Mike
Adam, for private loans there are a few agencies that refinance them if you have good credit and a job. The original lenders themselves rarely offer that option, but you can probably find the outside third party refinance lenders through Google search. Getting approved is pretty difficult though.
I appreciate your rapid and thoughtful response.
However, I completely reject your proposed solution. Making $5 dollar payments and being current is not going to start paying off the debt, it is just another step towards the debt still being there when I die to be passed on to whoever is unlucky enough to have a paper trail connected to me.
That’s not moving forward, that’s treading water while you are actually sinking.
And as a whole, I reject the entire idea that I owe more than 20k, I will not agree to anyone that I owe 40, 50, 60, whatever arbitrary number they claim I should pay them.
Like I should pay triple rates for an education that did nothing that it advertised it was going to do and has provided next to none of the skills I have actually used to make money.
Although I appreciate your attention, your solution is really shallow and is basically exactly what the collectors, banks and the system want me to do, so that things go easy for them and I am hardly in the mood to do that. And as such, it seems a little shifty to me for you to be providing advice solely from their viewpoint with just a cursory/perfunctory ‘gosh that sure is bad’ as to my actual life situation.
Maybe you should go into a different line of work, one where you are not a toady for the wealthy and their crap system, one where you can actually be building the replacement for this system instead of being a cheerleader for evil stupidity.
Well you are more than welcome to object to the amount now claimed but if you go back and read your borrowing agreement you will find these are the terms you agreed to.
The solution allows you to accomplish your goal within the programs available.
While it is not a perfect solution, it is a solution available to you today that will stop the balance from building from more fees and penalties.
Sorry you did not like the advice.
J, it’s not an arbitrary number. The amount you owe is due to interest accrual and default/late fees that occur when you don’t pay a federal loan. If you don’t address the situation it will only get worse. When you do get employed, they can garnish your wages. They can also offset tax returns and take payments out of social security. And they will take 1/4 of those forced payments and apply them to fees. You can’t hide from the federal government, and they collect well over 80% of defaulted balances over time due to their extraordinary collection capabilities. The debt will not be ‘passed on’ to anyone if you die.
Steve gave you good advice. The payment plans based on your income also have forgiveness elements after 20-25 years, although this can be taxable. I can understand being angry. In these types of situations, unfortunately that anger can be misdirected towards people who are trying to help you and with good intentions. If you went to a for profit school and they scammed you, you can try to apply for cancellation although this is very rare with federal loans. But if you just weren’t able to get a good job with your education, that’s a different story and many people are in the same boat.
Steve has helped a lot of people with free advice and he understands, like anyone who works with borrowers regularly, that hiding or trying to fight the bureaucracy is not a high probability sucessful outcome for dealing with your loans. The best bet is to try to work within the system with the options that you have, before things get worse.. which they will. This unfortunately won’t go away and the balance will continue to grow. If you get current at least you can avoid some of the fees and interest accrual, since the payment plans he mentioned have some limitations on the amount of interest that can accrue. You should probably get on IBR or a similar program and stay on it.. if not you will eventually have to deal with the loan through less attractive payment options like wage garnishment or tax offset.