Copy of FSP Private Student Loans Lofaro Draft

Private Student Loans Information Sheet Private Student Loans (PSL) are loans given to you by a financial institution, like a bank or credit union, instead of the government, which provides federal student loans. In 2011, PSL constituted nearly 15% of all outstanding debt. One in three students who have taken PSL have monthly student payments greater than $225. It is of concern that students attending for-profit schools take PLS at a rate 8x higher than students at public institutions.1 13.4% of students default on their student loans within 3 yrs.2

What to do if you need help: Review contracts for private loans to better understand your rights and responsibilities; as well as those of the loan company. Do not wait to contact the loan company until you are in default. Starting a conversation with financial service companies is the first step to finding a resolution to your problem. If you loans have a cosigner--over 90% of private student loans were co-signed3--let that person know if you anticipate having trouble meeting your scheduled payments, as this will impact their credit history.

Loan Modification: ○ Refinance: Take advantage of lower fixed interest rates; may have access to better products as your credit history improves ○ Consolidation: One payment, resets terms of loan so may have smaller monthly payment, you may pay more in the end ○ ** DO NOT consolidate Federal loans with private ones, as you will lose the protections associated with the Federal loans** Loans in Default: ○ Settlement: Lender or collections agent may agree to accept less than the full amount owed to pay off the loan ○ Educate yourself to protect against abuses by collections agents & contact the state Attorney General if you feel your rights have been violated (MD: 888-743-0023) ○ Statute of limitations for private student loans varies by state ○ You have specific legal rights should a lender file a lawsuit against you* (see MD Consumer Debt Collection Act link below: Bankruptcy: ○ Very difficult to discharge loans; requires a high standard of “undue hardship.” ○ May be an option if you become disabled or certain other circumstances. ○ Consult a bankruptcy attorney to determine if you may qualify for student loan discharge

1 http://files.consumerfinance.gov/f/201207_cfpb_Reports_Private-Student-Loans.pdf

2 CFED: 2013 Scorecard webinar

3 http://files.consumerfinance.gov/f/201207_cfpb_Reports_Private-Student-Loans.pdf