Student Loan Mediation Gives Parties Creative Options to Resolve Disputes

As the student loan crisis continues, some borrowers are looking for ways to better manage their student loan payments. Student loans are notoriously difficult to discharge, so students who want to make their payments must look to other alternatives if they encounter financial difficulty. More students are now taking advantage of the mediation process to resolve their student loan dilemma.

Mediation is a private and confidential process in which two parties involved in a dispute work together to reach a solution. A neutral mediator helps the parties understand the other’s position better and uses conflict resolution skills to improve their communication.

During mediation, the parties may be able to reach a mutual decision that benefits both of them. Often, mediation allows the parties to communicate more openly than they had before so that the lender can become better informed about the borrower’s situation.

The parties can explore creative options and are not limited by the decision that a court would make. For example, the student loan provider may be able to grant a special forbearance or deferment so that the borrower can get on better financial footing before resuming payments. Another option may be to extend the payments in order to make the monthly payment lower.

The lender may agree to modify the loan to make payments more manageable to the borrower. This may involve lowering the interest rate, increasing the repayment period, decreasing the monthly payment or taking other action that makes payments more manageable. In some situations, consolidating the loans may help the situation. In other situations, the lender might adjust the student loan structure so that the borrower can pay based on his or her actual income and expenses.