Is Private Student Loan Forgiveness Possible?
Loan forgiveness helps people with federal student loans. But private loans don't qualify. Discover potential relief options for private student loans.
Published August 8, 2022
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- Private student loans cannot be forgiven like federal loans.
- Some opportunities for private student loan relief exist, such as refinancing.
- Legislation is currently shifting, and new relief options may become available.
Private student loans, offered through financial institutions instead of the government, are a part of many students' financial planning for college. However, private loans are often riskier than federal loans.
By and large, private loans do not qualify for student loan forgiveness. Because the federal government doesn't administrate private loans, private lenders aren't required to offer any assistance to student loan borrowers. This means private lenders usually don't offer flexible repayment plans and loan forgiveness.
However, you still have some options for private student loan relief. Read on to learn about some alternative relief options that might help you out.
Can Private Student Loans Be Forgiven?
Many people rely on loan forgiveness to eliminate college debt. For example, Public Service Loan Forgiveness (PSLF) offers debt relief for graduates who enter public service jobs, such as teaching, law enforcement, and public health. Certain protections also exist, such as the Closed School Loan Discharge, which eliminates debt if your school closed during your education or soon after you left it.
As the U.S. government doesn't administrate private loans, they can't force private lenders to offer these services to borrowers. Because of this, private student loan forgiveness is not possible.
Alternatives to Private Student Loan Forgiveness
Other than forgiveness, some options are available for people struggling with repaying private loans. While these might not be available to all borrowers, it's worth checking with your lender to see if you qualify.
Discuss Relief Options With Your Lender
While not required by law to help, some lenders offer relief for those struggling to repay education loans. Your lender will have a specific contact to reach out to if you are struggling with repayment. Be honest about your situation, and they might help you readjust your payment plan to be more manageable.
Refinance Your Private Student Loans
Loan refinancing is the process of replacing and consolidating existing student loans with a new loan with its own terms. There are a few benefits of refinancing your private student loans:
- Reduce the complexity of dealing with multiple loans
- Secure a better interest rate
- Lower your monthly payments
Refinancing could help you lower the amount you need to pay each month and even over the loan's lifetime. Keep in mind that most lenders who offer refinancing in the private sector will want to make sure you can pay back the loan given your income and debt levels.
State Assistance for Private Student Loan Payment
Many states have assistance programs that offer grants for repaying student loans. Typically, these programs have similar requirements to PSLF, requiring borrowers to commit to a public service career in that state. However, terms are often generous, with thousands of dollars in grant money offered to help repay student loans of any origin.
Just Google your state and "State Loan Forgiveness Program" to see if your student loan qualifies.
Private Student Loan Deferment or Forbearance
Deferment and forbearance are two different ways to temporarily suspend student loan payments. If the borrower meets eligibility criteria, they can suspend payments for a set time. However, interest still accrues, and they will eventually need to resume payments.
Get Disability Discharge
If you become disabled, options may exist to discharge your loan. Many private student loan agreements include clauses to discharge loans in the event of a disabling event. Check your loan agreement to see if this may apply in your case.
File for Bankruptcy
If you can prove an inability to pay, bankruptcy may allow you to discharge student loan debt. However, this is very hard to do. You must prove "undue hardship," which means you can't repay the loan and maintain a minimal standard of living (and won't be able to for most of the loan lifetime). There are also other requirements you need to meet to discharge your private student loans in bankruptcy.
In addition, bankruptcy remains on your credit history and has complicated legal rules attached to it. Talk to a lawyer to see if filing for bankruptcy may be a good option for you.
Can Biden Forgive Private Student Loans?
Since the beginning of President Joe Biden's term, there has been a lot of talk about canceling student loans. In certain cases, this has already happened. In June 2022, the Department of Education agreed to cancel the loans of about 200,000 borrowers in a class action settlement. In July 2022, Biden also released plans to revise the PSLF program.
However, so far, only public student loans have been affected, and it's unlikely private student loan forgiveness will be passed.
Frequently Asked Questions About Private Student Loan Forgiveness
Can private student loans be forgiven?
No. Generally speaking, private student loan forgiveness isn't possible. The government doesn't control private lenders, and it does not have the power to force private lenders to discharge loans. Because of that, private lenders have little incentive to eliminate existing debt.
Varying options for easing payments do exist, such as refinancing, deferment and forbearance, and state assistance. Talk to your lender or your state's assistance program to learn more.
Can private student loans be forgiven after 10 years?
The 10-year timer on student loan forgiveness comes from the Public Service Loan Forgiveness program. In this program, after 10 years of student loan repayments and work in public service, the remainder of your loan is discharged. However, this is only for public student loans. Similar programs exist at state and private levels for repaying private student loans, but these typically offer smaller repayment grants.
How do I get rid of private student loans?
The first step to getting rid of private student loans is to come up with a financial plan. Honestly assess your financial situation, and speak to your loan provider about potential aid or repayment plans. Remember, every bit extra towards your repayment helps shorten the loan's term. Options such as refinancing your loans, declaring bankruptcy, and using state repayment programs can all help to eliminate student debt.
Can I convert private student loans to federal?
No. While federal loans can be converted to private loans via a refinancing plan, there is no way to convert private student loans to federal ones. This is one major reason why borrowers should think carefully about refinancing their federal student loans, as it makes those loans ineligible for forgiveness and repayment programs.
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