Here's What to do if You're Stuck With a High Interest Private Student Loan

High interest private student loans are tough. Many people don’t realize how different they truly are from federal loans provided by the government. The best thing to do is to pay them off as fast as you can, or refinance them into a lower interest rate. If you don’t think you can pay off your loan balance in the next 12–18 months, then I’d look at refinancing.

There are several student loan refinancing companies out there, like Earnest, Sofi, and Laurel Road. They’re all very similar and usually have good customer service, so I would just pick the one that gives you the best rate. Also, be sure to shop around. You can sometimes use offers from one company to drive down the rate of another company.

In addition to the larger institutions, you can always contact your local bank, or credit union as well. My wife and I are fairly well known in our hometown, and my wife’s uncle has large deposits at the credit union there, so we were able to refinance one of her private loans through that credit union, with one of her uncle’s accounts as collateral. He is unable to withdraw money from that account while her loan balance is open, but it drastically reduced her interest rate and monthly payment.

Lastly, be open to finding financing in new ways, and if you’re specifically hurting from the recent economic downturn, ask the institution that owns your loan for help. Far too many people simply stop paying a bill, and the lender is forced to eventually send it to collections. Collection agencies pay a fraction of what the balance is. Lender’s don’t want that, and you especially don’t want that on your credit. Give the lender a call, and show them that you’re a real person who’s hit a temporary snag. You’d be surprised how helpful that can be.