student loan modification

Are You Eligible for Student Loan Modification?

  12/4/2014 by    in Student Loan Repayment   2 Comments

Private student loan borrowers who are struggling to repay their loans may soon get some relief thanks to new programs being rolled out by two of the largest private lenders in the country. Wells Fargo and Discover Financial Services both have announced plans to offer private student loan modification programs to their existing clients. This is definitely a shift since private student loan providers typically do not offer many options for those having difficulty paying back their debt. In fact, the Consumer Financial Protection Bureau (CFPB) saw a 38 percent increase in complaints regarding private student loans this past year. The majority of the complaints dealt with repayment options and lack of flexibility in restructuring loans, according to the CFPB annual report released in October. Although private student loan lenders receive quite a bit of harsh treatment in the press, it’s interesting to note that private student loans only account for eight percent of the total $1.15 trillion in student loan debt. Lenders, however, are listening to both the CFPB and consumers, and are taking steps to help those facing financial hardships. Could you be eligible for one of the new private student loan modification programs? If you have a current loan with either Wells Fargo or Discover, here’s what you need to know.

Wells Fargo

In May, Wells Fargo began a pilot phase of their student loan modification program. Many borrowers had their payments reduced by 31 percent. This month, the program was opened to all existing borrowers who are 120 to 130 days late on their payments, or are current and at risk for falling behind due to a financial hardship or medical issue. To qualify, all borrowers on the loan (including parental cosigners) must show a documented hardship. In addition, Wells Fargo will determine eligibility for the program based upon current income, credit score, and overall debt. If you meet the requirements for modification, you may have your interest rate lowered to as little as one percent. The modification will last for a minimum of 12 months, but may be extended for as long as the life of the loan. Unfortunately, borrowers who are more than 130 days late, or in default, are not eligible for the program.

Discover Financial Services

Earlier this year, Discover did extend interest-only payments ($50 minimum) to some of its borrowers. Very few details, however, have been released about the student loan modification program that is set to begin in early 2015. We do know that they will be offering both an interest-rate reduction and a partial loan-forgiveness option. Unlike Wells Fargo, Discover will not require documentation from borrowers to prove they have a legitimate financial hardship.

Borrowers who have their student loans through a lender other than those listed may still have options, as well. PNC Financial Group began lowering some borrower’s rates earlier this year, and private student loan giant, Sallie Mae, has offered modifications since 2009. If you are having difficulty paying your student loans, reach out to your servicer for help. You can also contact the CFPB, if you are having trouble working out a plan with your current private student loan servicer.

About Tamara Krause

Tamara is the Social Media Coordinator and a regular writer for eStudentLoan.com, ScholarshipExperts.com, and CampusDiscovery.com. She enjoys helping students prepare for college. As a mother of four, Tamara has first-hand experience with many areas of education, including special needs (autism), the International Baccalaureate program and post-secondary education. She enjoys speaking at schools and mentoring others online. In her free time, Tamara enjoys volunteering and supporting her favorite football team, the Jacksonville Jaguars.
2 Comments
  1. Brian

    Fantastic info– too many recent grads are completely unaware of the multiple ways they can offset or alleviate the burden of their student loan debt.

  2. Nicholas Olow

    Wells Fargo’s Publicity Stunt to Lower Private Student Loans – Not a Real Solution to Help Struggling Borrowers!

    To whom this may concern:

    As part of a Wells Fargo PR efforts to change it negative image of not working with borrowers struggling with private students loans, they have decided to release information to the news and media outlets that if you took out a private student loan and can demonstrate a financial hardship and/or at risk of a default situation that they are now willing to work with borrowers to lower their interest rates down to 1 percent or lower their payments to an amount between 10% and 15% of the borrowers income.

    What Wells Fargo doesn’t tell you in the press releases is that if the co-signer has the ability to make the payments they will not make an attempt to work with borrower to lower interest rates even if the borrower can demonstrate a financial hardship and/or is at risk of default.

    Going immediately after co-signers who are typically the parents to pay for their loved-ones private student loan payments without first trying to work with the primary borrowers to come up with a viable solution to help them stay on track with their student loan payments and prevent a possible default situation by either lowering their interest rates or their payments to an amount between 10% and 15% of the borrowers income is unconscionable, unethical, morally wrong, and should only be exercised as a last option because it has the potential to cause emotional distress and ill-will between the borrower and the co-signer.

    Well Fargo loan modification program is only designed to lower interest rates for the borrower when the borrower and cosigner both can demonstrate that this would cause a financial hardship.

    When you do the math, Wells Fargo Loan Modification Program is not really helping that many struggling borrowers because most private student loans are approved based on the ability of the co-signer to repay the loan.

    The only circumstances I can see Wells Fargo Loan Modification Program working is if the cosigners has any unforeseen medical expenses or job loss that would change their financial situation to repay the loan.
    Wells Fargo Publicity Stunt that they are willing to work with any borrower that can demonstrate financial hardship to help them lower their interest rates down to 1 percent and/or lower their payments down to 10 – 15 percent of their income is not helping that many borrowers struggling with their student loan payments who are at risk of defaulting on their student loans and is just a big publicity stunt!

    If you as a news or media institution can do some investigational journalism and highlight Wells Fargo’s current business practices in the private student loan industry, this would influence Wells Fargo and other banks like Discover Student loans to provide a real helping hand to the majority of borrowers struggling with making their private student loan payments and not just cater to a small minority that qualify if both borrower and cosigner can demonstrate financial hardship.

    In order to create real financial aid reform in the private student loan market, Wells Fargo and other banks should provide the same payment options that are giving to struggling borrowers who take out federal loans.