How to manage private student loan payments without federal COVID-19 forbearance

As student loan repayments resumed this fall for federal borrowers, many consumers with privately-funded student loans have been back in repayment for some time. Though the COVID-19 pandemic may have had a lasting impact on their finances, the emergency federal forbearance period was not available to private borrowers.

With or without emergency help, there are options for managing private student loan debt and staying on track for timely repayment.

Were private student loan borrowers eligible for COVID-19 relief?

Because private lenders own private student loans and not the federal government, they were not eligible for federal relief measures like the payment pause and interest waiver that expired this fall.

The one exception is privately owned Federal Family Education Loans (FFEL) in default status, which were included in the administrative forbearance.

Some private lenders have offered their own COVID-19 hardship options. However, these have expired as the economy recovers.

Strategies for making private student loan payments without coronavirus forbearance

There are a few ways in which private borrowers can make their private loans more manageable even without COVID-19-related assistance.

Refinance

Refinancing your private loans can help you reduce how much you pay each month by allowing you to secure a lower interest rate, extend your repayment term or both. However, refinancing your private loans only makes sense if your credit score or income has improved since you first took out your loans; otherwise, you won’t be able to get the best terms or interest rates.

If your current lender can’t offer you better rates than the ones you already have, consider refinancing with another company.

Pause federal student loan payments

If you have private and federal student loans, you can take advantage of the COVID-19 “on-ramp” period currently in effect for federal loans.

This transition window, slated to last through September 2024, allows for temporarily relaxed penalties if borrowers make late payments on their federal student loans. If you are struggling with your monthly bills, this could help you avoid the worst financial consequences of late student loan payments– at least for now.

Ask about payment assistance

Even before the pandemic, most private lenders already offered relief through forbearance, deferment or interest-only payments to those experiencing financial hardship. However, lenders can’t help you out if they don’t know you need assistance in the first place.

“The worst thing that you can do is to not communicate your payment difficulties to your loan provider,” says Kathryn Knight Randolph, associate content editor for Fastweb. “Rather than quietly falling behind on payments, pick up the phone and talk to a representative.”

Falling behind on payments can not only dent your credit score but also limit your access to loans and other credit products in the future. It’s best to contact your lender and explore your options if you have difficulty making payments.

Talk to your employer

Something good from the pandemic is that many companies are working hard to keep their employees happy amid a competitive job market. Part of this is wooing employees with generous fringe benefits, including student loan repayment assistance.

Although this isn’t offered at every company, you can always ask your HR department if this is available to you. This kind of assistance may come with some strings attached — for instance, you may have to stay with the company for a specific period of time — but it’s an option worth exploring to make things easier on your pocket.

Restructure your budget

If you’re facing financial hardship due to loss of employment or a reduction of income, you may need to make adjustments. Take a harder look at how you spend money to ensure you can still make minimum payments on your student loans.

“Revisit your monthly budget by sitting down with a partner or accountability person and looking at what’s coming in versus what’s going out,” says Derek Brainard, national director of Financial Education at AccessLex Institute.

Once you have this down, Brainard suggests finding ways to improve your cash flow. You can do this by dropping subscription services you rarely use and cutting back on takeout. You can also revise old contracts, such as your internet and cellphone plan, to see if you can switch to a cheaper option.

If you need help tracking your earnings and spending, you may want to try a budgeting app. These small changes to your monthly spending may seem insignificant, but they can help you avoid defaulting on your loans.

The bottom line

If you have private student loans that you’re struggling to pay in the wake of pandemic financial stress, reach out to your lender directly. Many offer options to help you manage your payments.

You might also consider refinancing your student loans. You may qualify for a more competitive rate than when you first borrowed, and you may be able to restructure your payments to reduce your monthly payments and overall interest.