Income-Based Repayment for Private Student Loans: Is It Possible?

Private student loans don’t play by the same rules as federal loans. No income-driven repayment plans. No forgiveness programs. None of it.

Federal loans, on the other hand, have options like the SAVE Plan and Income-Based Repayment (IBR). These plans figure out what you can afford based on your family size, adjusted gross income, and how much money you have left after paying for essentials like rent and groceries. And if your income stays low, you could see a chunk of your debt forgiven after 20 or 25 years.

But here’s the deal: private loans don’t come with those safety nets. Still, there are ways to manage your payments and take back control of your finances.

Related:

• How to Lower Private Student Loan Payments

• Private Student Loan Forgiveness Options

• How to Get Rid of Private Student Loans

Private lenders don’t do income-driven repayment plans because it doesn’t make them money. They’re banks and financial institutions focused on profit—not helping you manage payments.

Here’s the difference: federal loans are backed by the government, which allows them to take more risks. They can offer plans like IBR because they have tools like wage garnishment and no statute of limitations to make sure they get paid eventually.

Private lenders? They don’t have that safety net. They rely on credit checks, cosigners, and strict repayment terms to protect their bottom line. Their goal is to get repaid in full as quickly as possible—not to give you decades to catch up.

What this means for you:

• Private loans don’t care about your income. Relief options like deferment or forbearance are usually short-term and often come with extra fees or interest.

• Federal loans do. IDR plans like ICR or SAVE adjust your payments based on your income, even if it means stretching your repayment over decades.

Related: Does Sallie Mae Have an Income-Based Repayment Plan?

Wondering how private loans stack up against federal loans? Here’s a side-by-side comparison to help you understand the key differences.

Refinancing can lower your interest rate or monthly payments, but it’s not a magic fix. It depends on your credit score, income, and loan balance—and it might cost you more in the long run.

Here’s how it plays out in real life.

Example 1: Refinancing Success (With a Catch)

Sarah had $60,000 in private student loans at 9% interest, making her monthly payments $700 on a 10-year plan. Struggling to keep up, she refinanced to a 5% interest rate and extended her loan term to 15 years. Her monthly payment dropped to $400—a big relief.

Related: How to Refinance Private Student Loans

But that lower payment came with a trade-off.

By stretching her repayment term to 15 years, Sarah ended up paying more over time toward the new loan. Even with the lower rate, the extra years of interest added up to thousands more in total costs.

Takeaway: Choosing to refinance can provide short-term relief, but it often leads to paying more over time.

Related: Can You Transfer Private Loans to Federal?

Example 2: When Refinancing Isn’t an Option

Michael had $180,000 in private student loans across six accounts, with variable interest rates ranging from 8% to 15%. During the pandemic, those rates skyrocketed, making his payments unmanageable.

Despite pooling resources with his family, Michael couldn’t keep up. Refinancing seemed like a lifeline, but it wasn’t.

• Low credit score: Michael’s credit wasn’t strong enough to qualify.

• Income too low: Even a longer loan term wouldn’t bring payments within his budget.

• Cosigner issues: His mother, already managing Parent PLUS loans, credit card debt, and a mortgage, couldn’t cosign another loan.

Lenders denied every application. For borrowers like Michael, when refinancing isn’t an option, it’s time to explore other strategies.

Related: What Happens When You Can’t Pay Student Loans?

If refinancing doesn’t work, your options narrow to settlement, bankruptcy, or waiting to be sued. Each path has its risks, but sometimes they’re the only way to regain control.

Here’s how Michael found relief:

Step 1: Exploring a Settlement

Settling private student loans typically means defaulting first—a move that damages credit but creates an opportunity to negotiate. Most private student loan settlements land between 35-70 cents on the dollar, paid either as:

• A lump sum, or

• A structured plan over 3–4 years at 0% interest.

For Michael, settlement wasn’t an option. He didn’t have the cash for a lump sum or even a structured plan. With no way forward, we pivoted to a more drastic option.

Step 2: Filing for Bankruptcy

Bankruptcy felt like a last resort for Michael, but it was the right choice. His lender refused to negotiate, refinancing wasn’t possible, and he couldn’t afford to settle.

He had a true financial hardship.

Filing for Chapter 7 bankruptcy allowed Michael to take control. He initiated an adversary proceeding to discharge his loans under the undue hardship standard.

Here’s what happened:

• Temporary credit impact: Filing hurt Michael’s credit initially, but within a year, his score rebounded into the 700s.

• Negotiated settlement: Through bankruptcy, we settled Michael’s loans for 40 cents on the dollar, spread over eight years at 0% interest.

The result? Michael got a lower monthly payment amount, and he avoided the long-term costs Sarah faced by refinancing.

Related: Can Private Student Loans Be Discharged in Bankruptcy?

It makes sense that you’d hope private student loans offered income-based repayment. You’re not trying to skip out on payments—you just want to pay what you can afford.

But the truth is, there aren’t great solutions to lower private loan payments.

When refinance isn’t an option—even with a cosigner—you might be left considering settlement or bankruptcy. Each choice comes with trade-offs: settlement takes cash or a structured payment plan, and bankruptcy can bring relief but hits your credit in the short term.

The right path depends on your finances, your goals, and what you’re willing to give up to get relief. But you don’t have to figure it out alone.

We’ve helped hundreds of borrowers in your shoes find a way out. Book a call to talk with one of our student loan experts today.