People frequently find themselves needing to negotiate with their education lenders in order to obtain a lower interest rate, defer loan payments, or deal with other issues that may arise when dealing with student loans. Most lenders are open to such discussions, but there are a few things to keep in mind that can help all parties involved have a more successful and enjoyable negotiation.
One thing to keep in mind is that because student loans cannot be cancelled, most lenders are willing to wait. They are well aware that they will receive the funds eventually, and they are willing to charge higher interest rates if repayment takes longer than expected. As a result, compared to other types of lenders, an education lender can afford to be much more flexible with repayment options. If you fail to communicate with your lender, they may garnish your wages or take other action, so make sure you keep the lines of communication open with them.
When negotiating with an education lender, the most important thing you can do is establish a positive relationship with that lender right away. Make sure your address is up to date, and that you pay your loans on time. If you can’t make a payment for some reason, call the lender and explain the situation rather than simply not sending the payment. Many lenders will excuse payments for hardship on a regular basis, sometimes without even requiring paperwork, and others will accept a partial payment in a month if you are having financial difficulties.
It can be beneficial to have a specific contact at your lender’s offices in addition to establishing a positive relationship. Make a mental note of the person’s name and extension so you can call and ask for them again in the future. While anyone can handle your account, it is preferable to speak with someone who is familiar with you and your background, as this can make the negotiation process go much more smoothly.
A hardship deferment is required if you need to negotiate with your education lender to reduce or temporarily suspend payments. Most lenders have a form for hardship deferments on their websites, but calling to discuss a hardship deferment so that a note is made on your account before sending in the form can help. When you call to discuss a hardship deferment, be prepared to be asked about your income and expenses, and if you have any special circumstances, mention them during the phone call so that they are recorded in your account record.
You might also want to discuss repayment options with your education lender. When you start repaying your student loans, most lenders set you up on a plan where you pay the same amount every month by default. However, they frequently have other options available, such as a flex plan, in which you begin with small payments right after graduation and gradually increase your payments over the life of the loan, assuming that you will be earning more money and thus be able to bear the additional cost. Most education lenders don’t penalize you for paying ahead in a good month, so if you pay ahead in a good month, your total due the following month or months will be reduced accordingly.
If you’re unhappy with your current interest rate, simply calling and asking for a lower rate may be possible. Customers who consolidate their loans may qualify for lower interest rates from some lenders, which is an option to consider if your current interest rate is unsatisfactory. Consolidation can also lock in a low interest rate, which is beneficial if you believe interest rates will rise in the future.
If, despite your best efforts, your relationship with your education lender deteriorates, you may want to consider consolidating your loans with a different lender. Consolidation through government agencies set up specifically to handle student loans is frequently a good option. Private, for-profit companies should be avoided because their consolidation terms may contain hidden caveats that could cause problems in the future.