Shoveling out over $1,000 a month in student loans often makes me wonder-- why are the lenders not helping students eliminate debt? From personal experience, the biggest issue with my student loans are my private loans, it is often very difficult to lower monthly payments with private lenders, even when you have never missed a payment. Currently, the only options available to lower monthly payments on private loans is to extend the length of your loans (not ideal when you’d rather pay them off as soon as possible), apply for deferment (postpones loan payments), apply for forbiddance (will accrue interest that will be added to loan balance), or attempt to negotiate with lender to lower interest rates. While a lot of student loans tend to have federal student loans, more than $8 billion consists of private loans. Private loans are made outside of the federal student loan program and tend to be slightly more expensive and lack options to lower monthly payments including income-based repayments and consolidation similar to federal loans. Exploring repayment options for students with private loans could allow debt repayments more manageable and affordable.

According to a recent report by the Federal Reserve Bank of New York, 31% of people paying back student loans were at least 90 days late at the end of the fourth quarter. So what can the government do to assist the student debt crisis? The federal government is currently looking into ways to help lessen the burden with private student loans—which may include the potential of refinancing to lower interest rates. Being able to refinance loans at lower market rates, would dramatically help those students who were unfortunate enough to get nailed with a 9.5% interest rate on several loans (bad year to start college). One method that could be used to lower interest rates was expressed by Rohit Chopra, the Consumer Financial Protection Bureau student loan regulator,  would be to apply a risk level that would be available in certain situations. For example, a loan made to a college freshman would be one level of risk requiring a certain interest rate, and that risk level would decrease after the student graduates, obtains a job and demonstrates ability to make payments regularly. This method would help those borrowers who have obtained employment are making good money be able to refinance and lock in a better interest rate.

Are there any options available now to lower monthly payments on private student loans? Not many. While it is possible to consolidate private loans through credit unions, most consolidation services still require a cosigner. If you have a cosigner available, consolidation would be an option, some credit unions even let cosigners walk away from the loan obligations if the borrower has made on-time payments for 12 consecutive months. For me, I am trying to avoid having my parents cosign another loan (putting 4 kids through college takes a toll), at this time I am waiting it out and hoping the government will begin to work with students who have private student loans. I am looking forward to see how the refinancing method plays out; do you feel that it would make sense for the federal government to offer refinance options for private student loans?
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Danielle Rosato

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