Private Student Loans May Now Offer Modification Plans
Private student loan debt is probably the worst debt that a person can have. This is because banks that offer private student loans are not obligated to offer any sort of helpful repayment plans like the government backed loans offer such as income based repayment (IBR). Private lenders, banks, credit unions and other financial firms that provide education loans hold only 8 percent of the $1.18 trillion student loan market, however they are the hardest types of loans to deal with. With that said, the times may be changing as many individuals and groups such as the National Association of Consumer Bankruptcy Attorneys (NACBA) have been pushing government to make private student loans dischargeable in bankruptcy.
Recently Wells Fargo and Discover Bank announced that they will now offer student loan modifications in an effort to assist struggling former students with their private loan payments. A loan modification will lower your repayment interest rate but it may not allow for deferment. Wells Fargo has stated that borrowers must demonstrate a hardship to qualify for a modification but they do not need to be delinquent on the loan payments. Wells Fargo anticipates that 300-900 borrowers will benefit from the program by the end of the year. That is great news, but if the bank acts in a similar fashion to how they have said they will help homeowners with loan modifications, then it may take several months, submitting information multiple times and much heartache before a student loan modification is approved.
Although Wells Fargo says that interest rates may be lowered down to 1%, the big help will come next year when borrowers may qualify for extended repayment plans of up to five years. Other banks such as PNC and Sallie Mae have already offered modifications for student loans since 2009. Although this is great news to see some progress, the real benefit will come if/when student loans are allowed once again to be discharged in bankruptcy filings which will allow the younger generation to spend more and purchase homes which will in turn jump start the economy.
If you have additional questions regarding private student loans in Washington State, give Symmes Law Group a call at 206-682-7975 to learn about your options.