If you have student loans that you took out from a private bank or lender (that is, loans that are not federal student loans) you cannot take advantage of the federal flexible repayment plans. You can negotiate a loan modification with your private student loan lender or servicers, but according to a recent study, those lenders are not making it easy for borrowers experiencing financial hardship to restructure their repayment plans.
If you have federal student loans, you can opt for one of the flexible federal student loan repayment plans or, in times of financial stress, may be eligible to temporarily stop making payments. But private student loans are not eligible for these programs. You can always try to negotiate a loan modification or forbearance (temporary payment hiatus) with your private student loan servicer if you are experiencing financial hardship. But when doing so, you are at the mercy of the servicer.
According to a recent report by the Consumer Financial Protection Bureau, consumers with private student loans face significant obstacles when trying to get a loan modification in times of financial hardship. Almost half of the 3,800 complaints made to the CFPB from October 1, 2012 to September 30, 2013 came from consumers trying to get private student loan modifications. Because private student loans (like all student loans) are very difficult to wipe out in bankruptcy (learn when you can discharge student loans in bankruptcy) and because they are not eligible for federal repayment programs, private student loan lenders seem to have little incentive to play ball.
During the past year, the CFPB has met with industry officials to figure out ways to spur servicers to offer more loan modifications to borrowers in need. To that end, in July 2013, the Office of the Comptroller of the Currency, the Federal Deposit
Insurance Corporation and the Board of Governors of the Federal Reserve System issued a joint statement that encourages private student loan servicers to work with borrowers in financial distress. The institutions told servicers that they should come up with policies for providing extensions to pay, deferrals, renewals, and loan modifications, and then provide information to borrowers about these options, including eligibility criteria, and procedures for requesting a work-out.