If you have privately held student loans, you might be feeling a little jealous right now.
After all, those borrowers with federally held student loans received a temporary break on payments thanks to coronavirus relief efforts. This relief is referred to as “forbearance,” and remains in effect 2½ years after the outbreak of the virus.
But there’s no blanket relief package for those holding the $131 billion in private student loans, which accounts for less than 10% of the $1.75 trillion student loan market, as estimated by the Federal Reserve Bank of St. Louis.
However, you do have options if you’re struggling to make your private student loan payments.
By understanding what you have and what you can ask for, you’ll be better prepared to avoid a financial catastrophe.
Federal Loans vs. Private Loans
There is a significant difference between a federal student or parent loan and a private student loan.
As noted in the federal student aid websitefederal loans usually come with lower interest rates than private loans (because private lenders are trying to make money off of the loans). Federal loans are also more likely to have fixed interest rates and more liberal repayment options.
There are fewer advantages to taking out a private student loan over a federal loan for undergraduate studies. Financial advisors suggest exhausting federal loan options first. However, if you are looking for funds for graduate studies or you need more than what federal loans offer, a private loan may be the best option.
If a private loan is needed, shop around. Private lenders offer different interest rates, different types of loans (fixed vs. variable), different repayment options and different considerations for payments forbearance that could pause payments due to financial hardship.
To find out who owns your existing student loansyou’ll likely have to call your servicer to ask about each one — even loans from the same lender.
But gathering that list is…