Many ambitious college students need to take out loans to fund their college education and pay for living expenses while attending classes. Private loans have often seemed to be a smart option, especially since students could ask a trusted friend or family member to co-sign the financing. However, these arrangements have recently come under fire because of not-so-obvious terms that create problems for borrowers. Here are a few keys to understanding the private student loan debt disaster and the reasons it’s become an epidemic problem.

Private Student Loan Debt Problem

Payment terms apply while in school. With a private student loan, borrowers have customarily been required to adhere to payment terms while in school – including payments of principal and accrued interest. Considering the amount of time involved with classes, studying and other school-related activities, many students don’t have time for a job. Without a steady source of income, the arrangement has become challenging for borrowers, leading them to default on their loans.


Most private loans are unsubsidized. When a loan is “subsidized,” it means that interest is paid for or waived by the lender until the student graduates; at that point in time, monthly payments are required and interest will begin to accrue. A typical federal student loan is subsidized, meaning the student is essentially borrowing and using funds for free while in school. A private loan is unsubsidized, so it’s more like a credit card that you must begin monthly payments on as soon as you receive funding.

Hardship options are usually unavailable.
Public loans from the federal government do typically allow for hardship arrangements if a borrower is unable to make monthly payments. A forbearance or deferment may be issued by the government if you’re able to prove that you’re going through tough times, such as a lost job or illness. Most private student loans do not allow for hardship exemptions, so you’re required to pay no matter what the circumstances. Borrowers are unable to pay, leading to the current private student loan debt disaster.

Interest rates can fluctuate considerably.
Unlike public loans that maintain a fixed interest rate over the term of the loan, most private loans include variable interest rate provisions. This means that your interest rate may vary based upon economic factors and inflation. It can be difficult to plan ahead and unforeseen factors may mean you’re paying a lot more or less from month to month.

Private loans can be co-signed.
Because borrowers of private student loans can use a co-signer to qualify, the arrangement essentially puts another person on the hook for repayment. If the primary borrower makes late payments or defaults, these circumstances impact the credit history of the co-signer as well.


Private student loan debt lawyer in San Diego

If the private student loan debt disaster has impacted you and you’re being hounded by creditors, you may have options to ease your financial burdens. But negotiating your debt or attempting to settle on your own can be very difficult, and your rights may not be fully protected. Talk to a private student loan debt expert in San Diego about your options.


Daniel R. Gamez, an attorney focusing exclusively in debt settlement, is licensed to practice in all state and federal courts in California and Texas. Mr. Gamez owns and operates the Gamez Law Firm in La Jolla, CA. For more information, please contact Daniel Gamez at 858-217-5051, or visit