December 13, 2018

Loan Modification Help on the Horizon for Private Student Loan Borrowers?

struggling student loan borrowerWhen talking to potential clients seeking information about repayment options for student loans, one of the first questions I ask has to do with whether the student loans are government issued or government insured, or if the loans are private loans.

If the loans are government loans – owed or managed by the U.S. Department of Education, we have a variety of options set out in federal law. Although the rules are not consistent among the various types of federal loans, for the most part, we have the option of curing defaults, restructuring payments based on the borrower’s income, getting some or all of the loan forgiven based on the borrower’s employment, and otherwise avoiding wage garnishment or bank account levy.

Basically, the Department of Education offers many options to help put struggling student loan debtors back into non-defaulted payment status. The rules to effectuate this goal are not always clear or consistent but that is the goal.

Private student loans are another story. None of the borrower friendly payment modification or default cure provisions set out in federal law apply to private loans. In fact I would go so far as to say that private student loans are one of the worst financial moves you can make – the loans are generally not dischargeable in bankruptcy, lenders have no incentive to work with you, and high interest and penalties that apply to private loans could leave you in unmanageable debt for decades. [Read more…]

Worst Case Scenarios for Private Student Loan Co-signers

worried student loan borrowerA recent U.S. News & World Report story about student loans contained a startling fact – more than 91% of private student loan borrowers took out private student loans with a co-signer.  In most cases, that co-signer is a parent.

What are the potential issues that could impact you if you are a co-signer? 1

First, you need to verify that the loan you co-signed for is a private student loan.  If you co-signed for a federal or federally guaranteed student loan, you will have additional protections.  This article focuses on private student loan co-signers only. [Read more…]

  1. Note the difference between a co-signer and a guarantor.  A co-signer’s obligation is exactly the same as the other co-signer, regardless of who is receiving the statements.  A guarantor, on the other hand, only becomes liable if the primary borrower goes into default.  See Wikipedia’s definition of co-signer here, and guarantor here.