New Private Student Loan Modification Programs
While federal student loans have offered income-based repayment plans and rehabilitation options for several years, private student loans have mostly resisted any such flexibility. There is hope that that may be changing, though, as Discover Bank and Wells Fargo recently announced that they will begin offering student loan modifications in February 2015.
These programs are intended, at least temporarily, to reduce interest rates for struggling borrowers in order to make payments more affordable. Wells Fargo’s program is intended to reduce monthly payments to between 10%-15% of a borrower’s income. Borrowers will likely need to apply for these programs by submitting financial information to their loan servicer.
While many details are still needed, this appears to be a step in the right direction. Richard Cordray, Director of the Consumer Financial Protection Bureau, recently called on private student loan servicers to offer modification options, stating that “struggling private student loan borrowers are finding themselves out of luck and out of options” and that consumers “are driven into default because private student loan companies are not providing concrete loan modification options.”
Without these programs, defaulted private student loan borrowers have few options. They have no rehabilitation rights and bankruptcy discharges are generally difficult to obtain. Often, the only option for these borrowers is to defend collection lawsuits in court in hopes of preventing a judgment against them, which can sometimes be both difficult and costly. And because many private student loans require co-signers, this lack of options can also impact relationships with friends and family.
If you are struggling to make your student loan payments, please contact us today for a free consultation.
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