Banks and other financial institutions make private student loans, which are separate from federal student loans. Do you need help with a private student loan?
If you have federal student loans, you have access to many different repayment plans and other alternatives – like deferment, forbearance, and cancellation options – but private student loans are a different story. Which options you’ll get, if any, depends on the terms of your loan agreement, your lender, and, to some extent, the law.
Before you do anything else, get a copy of your loan agreement. Private loan terms vary widely. If you don’t have a copy of your loan agreement, call your servicer and ask for one. Read the contract to determine if it includes repayment options. You might be eligible for interest deferment, forbearance, modification, and workouts.
If you’re not in default, you might be able to refinance. The terms of these loans vary widely, so it’s best to shop around. If you have good credit and income, you could qualify for a lower interest rate or an extended term. If you’re in default, you’ll need a creditworthy cosigner to refinance.
If you’ve defaulted on a private student loan, state law will determine the statute of limitations on the debt. A private lender must file a lawsuit within this period in order to collect the debt through garnishment or attaching to your other assets. You should expect a private lender to file a lawsuit within this period. Even if the lender hasn’t filed a lawsuit yet, you can negotiate a settlement after default. A good tactic could be to figure out how much the lender might be able to collect from you through garnishment and offer a repayment plan in the amount that can be garnished
Even if the debt is valid, you might have a claim or defense that prevents the lender from recovering the full amount of the debt. Borrowers have rights under the Truth in Lending Act (TILA) against private lenders that don’t apply to federal loans. The statute of limitations is only one year. So you have a limited time to sue if your lender violates this law. Also, the Fair Debt Collection Practices Act (FDCPA) applies to student loan debt collectors, but does not apply to creditors collecting debts they own.
The school that you attended is also an important factor. The Consumer Financial Protection Bureau has sued several for-profit schools in the last few years. If you attended one of these schools and have a private loan, you should have been notified about these actions and the status of your loans. You shouldn’t refinance any loans from any of these institutions until you know that the debt is valid and enforceable.
To find out more about available repayment options for your private student loans or if you need help interpreting a private student loan agreement, Financial Warranty is here for you! Our team of legal and financial professionals will go over your case and make sure that your rights – and money – are protected.