People with private student loans have been struggling during the pandemic. Their loans aren't eligible for the government's penalty-free repayment pause, which is in effect until at least Oct. 1 for federal student loans.
About 70% of borrowers in a new survey from Student Loan Hero have been successful in getting their private lender to give them a break after they called to ask.
Nearly three out of ten people in the survey with private student loans say they've thought about filing for bankruptcy over the last three months. Gen X has considered this the most.
We talked to a certified student debt counselor and student loan lawyer, Christie Arkovich, who says a lot of people don’t realize you can discharge student loan debt in bankruptcy.
“What we're targeting is someone who usually had federal loans and private loans and we are usually arguing that the private loans were taken outside the cost of education and therefor, they're just like any other debt, credit card debt and such, and they can be discharged,” said Arkovich.
“Outside the cost of education” means more has been loaned out than what the person needed. Arkovich says her goal with bankruptcy cases is not to necessarily get rid of the entire debt, but to make payments sustainable and affordable, with an end date.
Bankruptcy is an extreme measure and not for everyone.
“Bankruptcy is a last resort option, because it will really force you not only as a student loan borrower but as a citizen and a consumer to start from scratch on your finances,” said Arkovich. “So, your student loan debt shouldn't be the only reason that you would consider bankruptcy.”
One thing to consider first with private student loans is debt consolidation. You can work with a nonprofit credit counselor on that. There are also repayment assistance programs for private loans.
Federal student loans have more options, including student loan forgiveness programs.
For current students, make sure your FAFSA is up to date, so it reflects your family's current financial situations. After that, contact your school's financial aid office. Explain your situation if your family has lost income as a result of the pandemic.
Colleges expect students to appeal their financial aid packages right now, and it may get you more money to help pay for school.