Editor's Note: For the latest developments regarding federal student loan debt repayment, check out our student debt guide.
Although the Biden-Harris Administration’s plan for widespread student loan forgiveness was ultimately shot down by the Supreme Court, all is not lost for the millions of borrowers hoping to have their loans canceled.
For instance, the administration established a new income-driven repayment plan known as the Saving on a Valuable Education (SAVE) plan. This program replaces another IDR plan — Revised Pay As You Earn (REPAYE) — in an attempt to improve some of its shortcomings and provide greater relief to struggling borrowers. SAVE extends the repayment timeline to 20-25 years and forgives any remaining balance after that period.
That said, student loan forgiveness options may be more limited for borrowers with private loans, who owe an average of $54,921 each.
Student Loan Breaks for Many but Not All
The Biden administration and the U.S. Department of Education have forgiven a large amount student loan debt so far via targeted relief efforts. It canceled $9.5 billion in student loans in 2021, mainly for federal student loan borrowers who are public servants or graduates of now-defunct schools. The administration also canceled federal student loans for borrowers who were defrauded by their institutions and who have total and permanent disabilities.
In August 2022, President Joe Biden announced a larger initiative to forgive up to $20,000 in federal student loans for those who met certain income requirements. However, the Supreme Court deemed that the President didn’t have constitutional power to implement such a plan. Either way, private student loan borrowers were not included in any of the relief.
Recommended: A Guide to Private Student Loans
Can Private Student Loans Be Forgiven?
Do lenders forgive private student loans? Unfortunately, that almost never happens.
However, many do offer student loan deferment or forbearance options for borrowers facing financial hardship. Interest typically accrues during these periods, regardless of whether the borrower is making payments.
Read your loan contract or disclosure statement for your loan, which contains information about terms, rates, fees, and penalties. Here, you’ll find information related to any hardship programs offered by the lender. You can also reach out directly and ask about your options.
Whatever you do, don’t miss a payment. Contact your lender immediately if you’re facing a hardship that will prevent you from making payments on time and in full. After a default on a private student loan, which can happen quickly, private lenders may hire a collection agency or file a lawsuit.
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Private Student Loan Debt Relief Options
Don’t assume that if you’re having trouble making your private student loan payments you don’t have any recourse. Here are a few moves you can consider.
1. Refinance Your Private Student Loans
Refinancing your student loans can offer several benefits. If you have a good credit history and solid income, or a cosigner, you may be able to qualify for a lower interest rate, reducing your monthly payments and the total interest you pay over the life of the loan.
Or you may be able to lengthen the term of your loan and decrease your monthly payments (but elongating the repayment term will usually increase the total interest paid). Give this student loan refinancing calculator a try.
When you refinance, the lender will pay off your old loans and issue you a new loan with a new rate and terms and with one payment.
A few lenders will refinance both federal and private loans. You’ll also be given a choice of a fixed or variable rate.
Even if interest rates rise, variable rates often save money over the long term.
Do your homework:
• Be sure you’re getting the lowest rate possible with terms that fit your short- and long-term needs.
• Although student loan refinancing almost never comes with any closing costs, it’s a good idea to find out if there are any fees involved. Keep in mind that you can refinance more than once.
• If you plan to refinance any federal student loans, know that doing so will permanently forfeit all federal benefits and protections, including income-driven repayment plans, federal deferment and forbearance options, and forgiveness programs such as Public Service Loan Forgiveness (PSLF).
• Consider lenders that initially do a soft credit pull before you actually apply with them to refinance your student loan. That way, shopping for interest rates will not affect your credit.
Recommended: Soft vs Hard Credit Inquiry: What You Need to Know
2. Talk to Your Lender
Talk to your lender about your options to repay your student debt. You aren’t the first (and you won’t be the last) to ask for help, and many private lenders offer some type of loan modification for borrowers who are financially struggling.
You may be able to negotiate a lower interest rate or a lower payment over a longer term, or set up a period during which you can make interest-only payments.
Be ready to answer questions about why you’ve fallen behind, what other debts you’re paying, and about your income prospects.
Always communicate with your lender to avoid student loan forgiveness scams. Some private companies that falsely offer debt relief may try to ask you to pay monthly costs or upfront fees, ask you for your identification, or promise immediate loan forgiveness. If you think you’re the victim of suspicious activity, contact the Federal Trade Commission.
3. Consider a Payment Pause
Some private lenders offer deferment or forbearance, which will allow you to postpone payments.
• Deferment is sometimes available to borrowers who are planning to go back to school or who are entering military service.
• Forbearance is typically available for those who have had an unexpected hardship that makes repayment difficult, such as an illness or a job loss.
Interest will still accrue during these private loan payment breaks.
As with federal loans, your employer may assist you with your private loans, especially if your skills are in demand. Also, many industries and professional associations offer student loan repayment assistance for firefighters, teachers, lawyers, and health care workers.
The Takeaway
Private student loan forgiveness is rare and has not been included in any sweeping moves to cancel student loan debt or provide relief. Borrowers of private student loans may be able to refinance and get a better rate or work with their lender if they’re struggling.
SoFi refinances both federal and private student loans. There is no cost or prepayment penalty. Deferment and forbearance plans are available.
Looking to lower your monthly student loan payment? Refinancing may be one way to do it — by extending your loan term, getting a lower interest rate than what you currently have, or both. (Please note that refinancing federal loans makes them ineligible for federal forgiveness and protections. Also, lengthening your loan term may mean paying more in interest over the life of the loan.) SoFi student loan refinancing offers flexible terms that fit your budget.
SoFi Student Loan Refinance
If you are a federal student loan borrower, you should consider all of your repayment opportunities including the opportunity to refinance your student loan debt at a lower APR or to extend your term to achieve a lower monthly payment. Please note that once you refinance federal student loans you will no longer be eligible for current or future flexible payment options available to federal loan borrowers, including but not limited to income-based repayment plans or extended repayment plans.
Financial Tips & Strategies: The tips provided on this website are of a general nature and do not take into account your specific objectives, financial situation, and needs. You should always consider their appropriateness given your own circumstances.
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