Private Student Loans Forgiveness – The Alternatives

Private student loans are not currently eligible for student loan forgiveness programs. There are some alternatives for those who need help making payments, though. This includes forbearance, student loan refinancing, and other payment assistance programs.

Unlike federal student loans, private student loans are disbursed by private lenders, not the federal government. Borrowers with these loans rarely have the same protections as those with federal loans, such as loan forgiveness. Only a few private lenders offer income-based repayment plans or hardship options for borrowers.

In most cases, there are only two ways to discharge private student loans: the primary borrower either passes away or receives a permanent and total disability. Even then, the lender is not legally required to forgive the remaining balance.

With one of these student loan forgiveness alternatives, it may be possible to find some relief for private student loans. Keep in mind that they don’t work for everyone. Some of these options are also considered short-term solutions rather than long-term ones.

Can Private Student Loans Be Forgiven?

Private student loans cannot be forgiven, at least not by the same measures as federal loans.

The Biden Administration has been working on implementing more widespread student loan forgiveness programs. However, these programs are currently only available for federal student loan borrowers. This is mainly because federal loans are offered through the U.S. Department of Education, a federal government agency. Private student loans, meanwhile, are issued by private lenders such as credit unions, traditional banks, and online lenders.

Private lenders are not legally obligated to offer hardship programs or repayment plans to borrowers. They do have the ability to forgive loan balances, but they don’t have to, and they very rarely do.

Some private lenders may choose to discharge the loans, such as if the primary borrower dies. This is potentially good news for cosigners as it can also release them from the responsibility of repaying these loans.

There has been some talk about canceling private student loan debt for low-income borrowers or those with a qualifying disability. For this to happen, the government would have to pass new legislation. Doing this could make the government responsible for paying the remaining balance on any loans instead of the original borrowers. At this time, there are no set plans for this to happen.

For now, most full or partial forgiveness programs and income-driven repayment plans are limited to federal student loan borrowers. Even for these borrowers, there’s no guarantee of debt forgiveness or relief.

Even though private student loans are not eligible for federal or independent forgiveness programs, there are some forms of relief available. Some private lenders will work with borrowers who would be unable to pay otherwise. They may offer hardship options like custom repayment plans, refinancing, or forbearance. They may also offer lower monthly payments or interest exemptions, depending on the situation.

Private Student Loan Forgiveness Alternatives

Here are the top 5 alternatives to private student loan forgiveness:

  • Forbearance: With forbearance, the borrower can stop making payments on their loans for up to 12 months. It’s mainly for those experiencing a sudden or unexpected financial hardship, such as a lost job or medical complication. The idea is that the borrower will use this time to improve their finances and make a long-term repayment plan. Interest will continue to accrue while the loans are in forbearance, meaning the balance will also increase. Some lenders charge a fee for putting the loans into forbearance.
  • Deferment: A few lenders offer deferment, which also lets borrowers postpone payments, usually for up to 6 months. This is mainly meant for borrowers who are returning to school or joining the military. Eligibility mainly depends on income and financial means. For example, full-time employees who make less than 150% of the poverty line may qualify. Some people may qualify for other types of deferment, such as unemployment, rehabilitation training, or cancer treatments. Interest may still accrue on private student loans in deferment, but not always.