There are times when you are faced with debt from both federal and private student loans. Managing this debt can prove to be a struggle, but there are options available to you that are worth exploring.
What Are FFEL Loans?
This stands for Federal Family Education Loan. As of 2010, this program was eliminated. That doesn’t mean any debt incurred from the program was eliminated. These loans can be federally funded, or they can be privately funded. If you are unsure if you have an FFEL loan log into the National Student Loan Data System to determine what types of loans you have.
FFEL Loan Forgiveness
If you have an FFEL loan, you are possibly wondering, “Can debt from FFEL loans be forgiven?” In short, yes there are a couple of different ways that you can seek FFEL loan forgiveness for your loans. This is through Income-Driven Repayment Plans. However, these loans must be converted to a direct loan, by consolidating your loans to qualify for these repayment plans. The exception is with the Income-Based Repayment Plan.
This repayment plan is an income-based that requires you to consistently pay on time for 20-25 years. You will make monthly payments of 10% or 15% of your income after necessary living expenses have been deducted. This payment plan will provide forgiveness after 20-25 years and the plan is a qualified repayment plan for forgiveness under the PSLF terms.
How Do You Consolidate FFEL Loans
If you are looking to consolidate your FFEL loan(s), the first thing that you need to do is complete the consolidation form that is found on the student aid website. You will be able to choose which loans you want to be included in the consolidation. After you choose the loans that you want to consolidate, you will then have the option to choose a repayment program.
While you are waiting for your consolidation application to be processed, you still need to make sure that you are making loan payments. Your loan servicer will be the one to confirm when your consolidation has gone into effect.
Options For Private Student Loans
If you had to take out private student loans to help with college expenses, then you need to know what options are available to you to help repay your student loan debt. Unlike federal loans, you don’t have an option to apply for several different repayment programs that provide borrowers with loan forgiveness options.
As previously mentioned you can consolidate your FFEL loans into direct loans. However, if you don’t qualify to consolidate your loans, i.e. you have private student loans but they were not through the FFEL program, your next option would be to refinance your student loans.
Refinancing Your Student Loans
It is important to know that refinancing student loans is an option that is based on your credit. Keep in mind that if you do have a loan through the Federal Family Education Loan Program, and you choose to refinance, you lose all benefits and perks of having a federally funded loan. This includes applying for an income-driven repayment plan to try to get loan forgiveness down the road.
If you happen to be one of the lucky student loan borrowers with good credit, then refinancing your loans could possibly be the route that you should take. Unlike a loan consolidation, refinancing could possibly lower your interest rate, lower your monthly payments which shorten your payment terms and will help you pay your loan off faster.
Steps to Refinance Your Private Student Loans
- Make sure that this is a viable option for you. Meaning you understand all the terms and conditions of refinancing your student loans.
- Do your research. Make sure that there everything is upfront and straight-forward.
- Obtain and compare multiple interest rates with different lenders to make sure that you are getting the best rate.
- Choose a lender and submit your loan application.
Alternative Options for Private Student Loan Debt
Private Student Loan Forbearance or Deferment
If you are unable to consolidate or refinance your private student loans, there is still hope. You can contact your lender or loan servicer to see what options you have available. Some private lenders will allow you to defer or be given forbearance for your student loans. Each private lender has their own terms and conditions, and this will vary from lender to lender.
When you speak with your lender, you can inquire about loan modifications. Your lender may be able to work with you to help lower your payments, modify your payment terms, or place your payments on pause so that you can avoid defaulting on your student loans.
Some states offer a repayment assistance program that offers assistance for your private student loans. California, Florida, and Texas are three of the states that offer a state repayment assistance program. Therefore it would be a good idea to see what your state can offer to you and what the requirements would be to receive assistance.
Home Equity Loan
If you own your own home, yet you don’t qualify for a refinancing loan, you could look into your home’s equity to help you. People do this to help with debt- student loans are your debt.
What you want to avoid doing is going into default with your loans or attempting to claim bankruptcy. By being proactive and speaking with your lender, there are ways that you can avoid this situation. Lenders are more willing to help you when you are struggling to make payments if you communicate with them first.
Don’t ignore your student loan payments. There is always an option.
There is always an option.
As you can see you do have options for seeking help repaying your student loans. You may not have the option to eliminate the debt, but nonetheless, there are options. If you need help discussing these options and determining the best options for your situation, feel free to speak with one of our financial assistance specialists to help you get the ball rolling.