Consumers facing difficulty in paying back their private student loans often have a difficult time receiving any relief from lenders. While some smaller banks have relaxed their repayment terms for good borrowers in the past, two of the nation’s largest private lenders are set to make the same opportunities available to private student loan borrowers.
The Washington Post reports that Wells Fargo and Discover Financial Services are currently ironing out the terms of modification programs that could begin before the end to the year.
Officials with Wells Fargo, which has $11.9 billion worth of student loans outstanding, says the company plans to offer lower interest rates for eligible borrowers starting this month and extend repayment periods starting in February.
The move, the company says, could save consumers thousands of dollars in interest payments over the life of the loan. A test pilot conducted with a few borrowers in May found that a majority of participants had their monthly payments lowered by as much as 31%.
By the end of the year, officials estimate that 600 to 1,000 borrowers will take advantage of the program.
John Rasmussen, Wells Fargo’s head of education financial services, says the bank worked with regulators to create the program after repeatedly hearing that consumers needed more options when they faced financial hardships.
Under the new program, Wells Fargo will consider lowering the interest rate of any borrower who can demonstrate a hardship. Borrowers don’t have to actually be delinquent on their loans, instead they can be current on payments, but foreseeing a rough patch related to job loss or other issues.
The eventual extended repayment plans from the bank would offer up to an additional five years for people who need more help than an interest rate reduction.
Officials with Discover, which has $8.3 billion in private student loans, tell the Post that they are in the final stages of creating a modification plan.
With an anticipated launch early next year, the plans aim to offer lowered interest rates and forgiving some debt for borrowers in dire straits.
Wells Fargo and Discover aren’t the first private student loan issuers to offer borrowers relief.
Back in January, Charger One announce a new Education Refinance Loan that, as advertised, would provide borrowers with rates as low as 5.24% and a variable rate of 2.84%. The lowest rates are reserved for those borrowers with better credit.
Wells Fargo and Discover to offer student loan modifications [The Washington Post]
by Ashlee Kieler via Consumerist
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