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Private Student Loan Forgiveness: What Is It & How Does It Work?

By Melissa Brock · January 18, 2022 · 7 minute read

We’re here to help! First and foremost, SoFi Learn strives to be a beneficial resource to you as you navigate your financial journey. Read more We develop content that covers a variety of financial topics. Sometimes, that content may include information about products, features, or services that SoFi does not provide. We aim to break down complicated concepts, loop you in on the latest trends, and keep you up-to-date on the stuff you can use to help get your money right. Read less

Private Student Loan Forgiveness: What Is It & How Does It Work?

Nearly 43 million people collectively owe $1.59 trillion in student loan debt, according to data from the office of Federal Student Aid .

While federal student loan forgiveness sometimes shows up in the news, especially around election seasons, loan forgiveness for private loans is rarely discussed. The reason? It’s generally not up to politicians — and isn’t an across-the-board possibility.

The Biden Administration and the U.S. Department of Education canceled $9.5 billion in student loans in 2021 — mainly for federal student loan borrowers who are graduates of now-defunct schools and public servants. The administration also canceled federal student loans for borrowers who were defrauded by their institutions and who have total and permanent disabilities. In addition, President Biden most recently extended the pause on student loan repayment, interest, and collections until May 1, 2022, as part of the CARES Act.

Payments for federal student loans are now set to resume after Aug. 31, 2022, and people are talking about the financial cliff for millions of borrowers. You may wonder whether you can opt into forgiveness options for your private student loans.

Even though there isn’t a formal process for private student loan forgiveness, private student borrowers can rely on special exceptions, such as death or disability, made on a case-by-case basis.

Read on to learn if you can become eligible for private student loan debt relief.

Can Private Student Loans Be Forgiven?

Do lenders forgive private student loans? Generally no, except under dire circumstances, private lenders such as banks and commercial entities do not forgive private student loans. Dire circumstances include death or total and permanent disability.

That said, Congress could potentially pass legislation to cancel private student loans in the future.

In 2020, Democratic Congresswoman Madeleine Dean provided an amendment to the National Defense Authorization Act to offer $10,000 in immediate assistance to borrowers to pay down private student loans. The Republican-controlled Senate blocked it.

Now that Democrats control both the House and Senate, a similar bill might pass. However, it’s unclear whether private student loan forgiveness would command complete Democratic support — plus pass 60 votes to conquer a filibuster.

Though not impossible, private student loan debt would have to jump through several hoops for it to become a reality for borrowers.

Recommended: A Guide to Private Student Loans

What This Could Mean for You

If you’ve been waiting to see if debt cancellation will happen for your private student loans, it’s impossible to know for sure what will happen in future years. But right now, federal relief for private student loans isn’t available.

Though it seems private loan forgiveness seems to get less attention than federal loan forgiveness, you can still do a few things to help manage your private loans.

Some private lenders may offer cancellations, deferments, and student loan orbearances, but these vary by program. Read your loan contract or disclosure statement for your loan, which contains information about terms, rates, fees, and penalties.

You may also want to consider refinancing your private student loans. Getting a lower interest rate means you could save money down the road (depending on the loan term length). You can also consider refinancing student loans to simplify your payments, lower your monthly payment amount (by extending your loan term), or shorten your repayment period to save on interest. We’ll walk through these options more in detail below.

Recommended: Top 5 Tips for Refinancing Student Loans in 2022

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 potential, 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 so decrease your monthly payment (but possibly increase the total interest you pay over the loan term.)

When you refinance, your student loan lender will pay off your old loan and issue you a new loan based on your new agreement terms. You may be able to consolidate all your old loans into one manageable payment.

A few lenders will consolidate and refinance both federal and private loans. You’ll also be given a choice between a fixed or variable rate loan, whichever suits your personal situation. Again, do your homework:

•   Be sure you’re getting the lowest rate possible with terms that fit your short- and long-term needs.

•   Be aware of any fees that will add to your costs.

•   Check into the benefits you might lose if you refinance and also the perks you might gain. Note that you will lose certain federal loan benefits by refinancing federal student loans, including federal loan forgiveness benefits.

•   Consider lenders who initially will do a soft credit pull before you actually apply with them to refinance your student loan. That way, shopping around for interest rates may not impact your credit as much.

How to get the most favorable rates and loan terms? You’ll need to prove to your lender that you can make the payments (in other words, you’ll need to prove you have income that will enable you to pay your bills each month).

You’ll also need to get your credit score in good shape. Your credit score is a three-digit number that proves how well you pay back debt. Generally, the higher your credit score, the better (or lower) the offered interest rate.

Tapping into a lower interest rate can offer a great way to reduce your monthly payments and the amount you’ll owe over the long term. Just make sure you can actually save a significant amount on your loan payments before you choose to refinance.

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, a lower payment over a longer term, or set up a period during which you can make interest-only payments.

Be ready to answer some questions about why you’ve fallen behind, what other debts you’re currently paying, and about your future income prospects. Your lender will want to gain a clearer understanding of your financial situation before they offer to restructure your loan.

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. Review Federal Loan Options

If you have federal student loans, you may also want to explore ways to get your federal student loans forgiven.

Check to see if you can qualify for forgiveness based on the type of job you have. Federal agency employees, public service employees, volunteer organization workers, teachers, lawyers, those in the medical profession (including physicians, dentists, pharmacists, nurses, mental health workers, and veterinarians) can often qualify for forgiveness. Then, take the following steps:

•   Contact your federal student loan servicer. Your loan servicer will help you understand which programs you can qualify for. Find out which entity services your loan .

•   Make payments while your application for forgiveness is under review. Your loan servicer will be able to tell you how to continue making payments during your review period.

•   Take action if you don’t qualify. You may not qualify for forgiveness, cancellation, or discharge or qualify for only partial discharge. In that case, make plans to pay the remainder according to the details on your promissory note, which is the agreement you sign to pay back your loans.

Below, we’ve outlined several types of federal loan forgiveness, discharge, and cancellation:

•   Public Service Loan Forgiveness (PSLF) refers to canceling your remaining federal student loan debt after you make a specified number of monthly payments.

•   Income-driven repayment plans allow you to get your student loan payments adjusted based on your income.

•   You may be eligible for a closed school discharge if your college or university closed after or while you were enrolled at the institution.

•   You may be eligible for a Perkins Loan Cancellation and Discharge if you have a Federal Perkins Loan. You may qualify for this under certain conditions, including serving as a teacher, bankruptcy, death, school closure, service-connected disability (for veterans), as a spouse of a victim of 9/11 events, or total and permanent disability.

•   If you become permanently and completely disabled, you may qualify for a Total and Permanent Disability Discharge .

•   Along with submitting proof of death, your loved ones can get your federal loans discharged when you die. Very rarely, the Department of Education grants discharges due to bankruptcy.

•   If a school failed to do something related to your loan or failed in the educational services that the loan was intended to pay for, you may qualify for borrower defense to repayment discharge.

•   If your school falsely certified your eligibility to receive a loan, if you had a status that disqualified you from meeting the legal requirements for employment, or the school signed your name on the application or promissory note without your authorization, you may apply under any one of these through the False Certification Discharge application.

•   An Unpaid Refund Discharge refers to if your school did not return loan funds after you withdrew.

It’s important to thoroughly investigate the forgiveness, cancellation, and discharge rules, especially because most programs don’t offer upfront student loan cancellation. For example, it might take 25 years to become fully eligible for certain types of plans.

4. Private Student Loan Repayment Assistance Programs

Some private lenders offer deferment or forbearance options, which will allow you to temporarily postpone making 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 job loss. Keep in mind that student loan interest will still accrue during these private loan payment breaks, so don’t jump into this option without doing the math and understanding what it could mean for your financial future.

As with federal loans, your employer may assist you with your private loans, especially if your skills are in high demand. Also, many industries and professional associations offer student loan repayment assistance, including student loan forgiveness options for firefighters, teachers, lawyers, doctors, nurses, and other health care workers.

The Takeaway

Investigating debt relief options for student loans can seem overwhelming. However, actively dealing with your student loan debt by creating a repayment plan you can stick to can help you get your student loan debt under control.

Be honest with yourself about your spending habits and any changes you could make to afford your loan payments. If you don’t see any clear way out, always ask for help. If your private student loan provider isn’t willing to work with you, other lenders might. Keep up on what’s happening with private student loan repayment and forgiveness options.

If you are looking to refinance your private student loans (or your federal student loans), SoFi may be able to help. You can refinance with SoFi by Jan. 31, 2022, and get an exclusive cash bonus of $1,000 deposited into SoFi Checking and Savings. You won’t pay extra for application or origination fees or pre-payment penalties. Enroll online for free and choose your rate and term — you can choose to save money on your monthly payment or save on your total student loan interest.

SoFi Student Loan Refinance
Notice: SoFi refinance loans are private loans and do not have the same repayment options that the federal loan program offers such as Income-Driven Repayment plans, including Income-Contingent Repayment or PAYE. SoFi always recommends that you consult a qualified financial advisor to discuss what is best for your unique situation.

External Websites: The information and analysis provided through hyperlinks to third-party websites, while believed to be accurate, cannot be guaranteed by SoFi. Links are provided for informational purposes and should not be viewed as an endorsement.
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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