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Sallie Mae, for example, encourages students to pay off either their interest charges or $25 a month while they're in school. On a $10,000 loan, that can save up to $5,300 over the life of the loan. If students opt to make payments while in school, Sallie Mae also offers a discount of up to 1 percent. The lender may offer other types of discounts. At Wells Fargo, borrowers can get up to a 0.5 percent discount on their rate depending on the type of checking account they or their co-signers have with the bank. SAFETY NETS The interest rate shouldn't be your only concern when taking out a private loan. Last week, the Consumer Financial Protection Bureau released a summary of the complaints it received on private student loans. One of the common themes from among the 2,000 submissions was difficulty negotiating repayment terms in times of financial duress. This may be because it's up to the bank to decide whether to allow borrowers to postpone payment if they're unemployed or having trouble making ends meet. Borrowers who are having difficulty working out a payment plan with their lender or feel they were misinformed can file a complaint with the Consumer Financial Protection Bureau at http://www.consumerfinance.gov/complaint/ or by calling (855) 411-2372. The agency will then contact the lender on behalf of the borrower. "Many people have been able to get errors corrected or information about repayment options," said Rohit Chopra, student loan ombudsman at the CFPB. With federal student loans, borrowers who are unemployed or suffering economic hardship can opt to defer payments. Economic hardship deferments are granted one year at a time, while unemployment deferments are granted in six-month increments. This is by no means a giveaway, since interest charges keep piling up during deferment. But it provides temporary relief to students in real need without destroying their credit profiles. Another important safeguard with federal loans is that borrowers can apply for a program called Income-Based Repayment, which caps monthly payments at 15 percent of annual income above $16,300. Those who earn less don't have to make any payments; any remaining debt after 25 years is forgiven, or 10 years for those entering public service jobs. Eligibility for the program is determined by weighing the amount owed against income. There's no similar program with private student loans. But for those struggling to make ends meet, the lender may in rare cases reduce the interest rate or minimum payment amount to make the monthly payment more manageable.
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