How to Renegotiate Private Student Loans

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Have a copy of your loan statement available before contacting the lender.
Have a copy of your loan statement available before contacting the lender. (Image: Jupiterimages/Comstock/Getty Images)

Renegotiating private student loans can save borrowers money if interest rates have dropped or stave off financial woes if they are having trouble making the payments, Private loans, given by friends, family members, or lending institutions usually have higher interest rates than public agency loans making it potentially even more rewarding to restructure the terms.

Obtain a copy of the loan document you signed. It will detail the terms of the deal such as the amount of money you borrowed, the interest rate on the money, the length of the loan and if there are any special conditions such as a prepayment penalty. You want to fully understand the terms of your loan before contacting the lender.

Locate a copy of your most recent statement. This will detail the amount of money you have left to pay on the loan. It will also allow you to verify the terms in accordance with the contract or loan agreement you signed in terms of interest rate and monthly payment.

Gather financial documentation to support your claim for renegotiation. For example, if you are renegotiating the loan because you have a high amount of credit card debt, have the most recent credit card statements available. If you are trying to renegotiate because you are seeking higher education, then have a copy of your acceptance letter.

Determine the new terms you would like on the loan. Before contacting the lender, you want to have an idea of what you are trying to do in terms of reconfiguring the loan. Think about the new monthly payment, interest rate, principal reduction or loan extension your are looking to obtain.

Contact your lender and inquire about renegotiation. Explain your situation and the new terms you are seeking. For example, if you have a mountain of credit card debt, you might ask for a smaller monthly payment. This will extend the term of the loan until the debt has been repaid. If you recently lost your job, you can ask for a forbearance period while you look for a new job.

Engage with the lender. Ultimately the ball is in the court of the lender. They may come back to you with another proposal, accept the terms of your deal, or just say no to you all together. If they engage, be sure to provide them with records they request to back up your offer. If they say no, you can try and renegotiate again at a later date.

Get the new terms of the deal in writing. Just because someone on the other end of the phone said they would help, does not make the renegotiation legally binding. Get a new loan agreement that details the amount owed, interest rate, length of the loan and any other terms and conditions. Most likely you will have to sign the agreement in order for it to take precedence over the old agreement. Keep a copy for your records.

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