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

By Melissa Brock · August 30, 2022 · 5 minute read

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

Editor's Note: For the latest developments regarding federal student loan debt repayment, check out our student debt guide.

Of the 45 million Americans with student loan balances as of August 2022, 20 million may see their entire debt wiped clean, and millions more will be able to shed up to $20,000 of what they owe. Left out: private student loan borrowers.

Does private student loan forgiveness exist for these borrowers, who owe $131 billion? No, except under dire circumstances, which include death and total and permanent disability.

Student Loan Breaks for Many but Not All

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 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 federal student loan forgiveness of $10,000, or $20,000 for Pell Grant recipients, for borrowers who earn under $125,000 per year based on adjusted gross income, or $250,000 per year for married couples filing taxes jointly.

He also extended the pause on federal student loan repayment, interest, and collections through Dec. 31, 2022.

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? Almost never.

Many do, though, offer student loan deferment or forbearance. Interest accrues 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.

Whatever you do, don’t miss a payment. Contact your lender immediately if you’re facing a hardship. After a default on a private student loan, which can happen quickly, private lenders may hire a collection agency or file a lawsuit.

Recommended: Top 5 Tips for Refinancing Student Loans in 2022

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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.

•  Be aware of any fees, although student loan refinancing almost never comes with any cost. And you can refinance more than once.

•  Know that you will lose federal benefits and protections by refinancing federal student loans, including federal loan forgiveness.

•  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.
Get a rate quote quickly and painlessly.

Student Loan Refinancing
If you are a federal student loan borrower you should take time now to prepare for your payments to restart, including the opportunity to refinance your student loan debt at a lower APR or to extend your term to achieve a lower monthly payment. (You may pay more interest over the life of the loan if you refinance with an extended term.) 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, such as the SAVE Plan, 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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