Private student loans: relief and consolidation

According to current data, students owe about 99.7 billion dollars in private student loans. Since ninety percent of these loans have a cosigner, private student loans can pose a stressful and serious problem for whole families. You should know some things about these loans.

Why are private student loans such a problem?

Reducing the burden of private student loans is so much harder, because of the following:

– They carry the bad aspects of student loans without the forgiveness or income driven repayment options available for Federal Student Loans.

– These loans cannot be discharged by filing for bankruptcy.

Many private student loans are usually taken based on false promises that are made by unethical college companies. Historically, the percentage of students who take out loans at for-profit colleges has been more than twice the number of students who attend non-profit colleges.

How can I reduce my private student loan burden?

Depending on your current situation, you might be able to:

– Attempt to dismiss or reduce your principal balance by using traditional debt settlement programs that allow you or a debt settlement firm to negotiate with lenders.

– Attempt to lower your payments through consolidation or refinancing of your student loans for longer payoff terms or lower rates.

– As a short-term fix for private student loans, you should try to put a stop to your loans by asking lenders for deferment or forbearance.

Unfortunately, unlike with Federal student loans, it is not that easy to consolidate private student loans.

How to consolidate or refinance private student loans

Consolidating or refinancing your loan can be a great option for persons with good credit. Consolidation is done through private lenders who own companies that consolidate private student loans. Such lenders usually look at three things when deciding whether to refinance a loan:

Credit score – generally, you will need a credit score higher than 660 if you want to consolidate your private student loan.

Steady income – you need to have a steady job.

Debt to income ratio – generally, your debt to income ratio should not be more than 40-45 percent.

If you are creditworthy, refinancing is a great option because interest rates are low and many banks are offering rates below 3% for consolidation. Do you have a large student loan balance?

This can save you thousands of dollars while lowering your overall payment.

How to negotiate with your lender

You can attempt to either negotiate for yourself or hire a debt settlement firm to settle your debt. Because most people are afraid of negotiating with lenders, you should go with the second option. Firms that specialize in debt settlement have many tricks for dealing with lenders, making them the ideal for negotiating your loan.

Does debt settlement work?

If you want a lender to negotiate a reduced payment, you have to convince him/her of two things: that you cannot afford to repay your student loan in full and that the lender will get something if he/she negotiates with you and will be better off after the negotiation.

Although there are many ways of settling your private student loans, none of them is guaranteed. A debt settlement company will help you to understand what the lender needs to settle and utilize its leverage of having many clients to get the best deal for you. A settlement company settles debts in two ways:

– By finding a lender who is willing to refinance a lesser amount of debt and approaching him/her to settle for the amount

– Allowing time for you to build up a lump sum then go to your lender and try to settle.