NEW YORK (MainStreet)With outstanding student-loan debt in the U.S. totaling more than $1 trillion, two of the nation's largest providers of private student loans are trying to ease the burden on borrowers.
Both Sallie Mae and Discover announced small changes that may help lighten the load on recent graduates who face a mountain of debt. Sallie Mae now will allow college graduates to apply for a one-year, interest-only payment period after a six-month grace period instead of making full principal and interest payments.
The new feature is available to both recent undergraduate and graduate students starting this month.
"We believe in providing students with affordable options to pay for college and graduate school, as well as their post-graduate studies," said Robert Weiss, a Discover spokesman. "We wanted to make our loans even more affordable for students."
According to a recent report by the Consumer Financial Protection Bureau, private student loans account for more than $150 billion in outstanding student debt in the country. There are at least $8 billion of private student loans in default representing more than 850,000 individual loans.
While the changes may help some repay their private student loans, some experts say the modifications are minor and not enough to level the field between private and federal student loans, which often have more flexible repayment options and long-term forbearance.
"These look like cosmetic changes," said Lauren Asher, president of the Institute for College Access and Success, a nonprofit advocacy group. Asher said she recommends that private loans only be used after all federal aid options are exhausted something many students do not do. She added private loans also are hard to get forgiven, even in bankruptcy.