Private Student Loan Forgiveness Doesn’t Exist, But Try These Alternatives
Private student loans have higher interest rates for most borrowers, plus generally lower repayment plans and hardship options than federal loans.
If you’re struggling with your education debt, you may be wondering if private student loan forgiveness is an option. Unfortunately, private loans are not eligible for most forgiveness programs. However, there may be other sources of private student loan assistance.
Can Private Student Loans Be Forgiven?
When it comes to student debt, you have federal or private loans. Federal loans to the US Issued by the Department of Education when private student loans are obtained from banks, credit unions or online lenders. That difference is the reason why private student loan forgiveness is so unattainable.
While federal loans are eligible for programs like Public Service Loan Forgiveness (PSLF), private loans are not. Because private student loans are issued by individual companies rather than the government,
it would require legislation from Congress to pass any blanket forgiveness measures. And, any measures would have to allocate funds to pay creditors on behalf of creditors rather than just absorb the costs, making any amnesty measures unlikely to pass.
Currently, private student loans can only be forgiven in the event of death or permanent disability – but even in those cases, the discharge usually depends on your lender’s policy.
5 Ways to Get Private Student Loan Help
While private student loan forgiveness is not available, there are other ways to get help paying off your debt. By using these five tips, you can make your loan more manageable.
1. Career-Based private Student Loan Repayment Programs
Although federal forgiveness programs based on employment are not available to private borrowers, you may be eligible for career-based repayment assistance programs. These programs are usually run by state governments or business associations and will repay a portion of your loan in exchange for a commitment to work in a high-need area.
Careers that typically qualify for these programs include nurses, doctors, dentists, teachers, and lawyers. Consider these examples:
Nurse Corps Loan Repayment Program. Under this program, if you are a registered nurse, advanced practice registered nurse or nurse faculty member, you can repay up to 85% of your loan. To qualify, you must commit to work in a designated critical shortage facility.
New York State Teacher Loan Forgiveness. If you are a teacher in New York and work in an elementary or secondary school, you may be eligible for up to $20,000 in student loan repayment assistance. Under program rules, you must agree to teach in a hard-to-staff area or teach a high-need subject.
Florida Bar Loan Repayment Assistance. This program provides student loan assistance to staff attorneys employed by legal aid organizations that receive grant funding. Under the program, eligible attorneys can receive up to $5,000 per year to pay off their loans.
To find out if you qualify for student loan assistance programs, contact your state education agency or professional association.
2. Location-based payment assistance
If you want to move to another area, you may be able to get help paying off your private or federal loans. Some states and counties offer special incentives to encourage people to move to certain locations. For example:
Kansas Rural Opportunity Zone. Individuals who move to designated rural areas in Kansas can receive up to $15,000 in student loan repayment assistance from the state. And, you may also be eligible for income tax exemption, which makes this move even more beneficial.
Opportunity Maine. College graduates who attend Maine schools and decide to live and work in the state can be reimbursed for their student loan payments through earned income tax credits, up to an annual maximum.
Maryland SmartBuy. The Maryland SmartBuy program helps borrowers pay off their student debt and become homeowners. Through the program, eligible applicants can receive up to 15% of the purchase price of their home to pay off student loan debt (up to a maximum of $30,000).
Check with your state’s Department of Commerce to see if there is a similar program in your area.
3. Find an employer that offers student loan repayment
A growing number of employers are helping their employees with their student loan payments. Big companies like Estée Lauder, SoFi and Hulu will pay off a portion of your student loan as an extra benefit, up to an annual or lifetime maximum. Talk to your human resources department to see if your company has an employer student loan assistance program.
4. Contact your lender
If you’re struggling with your payments, contact your lender. Although private student loans are not eligible for loan forgiveness or income-driven repayment (IDR) plans, lenders often have their own programs that help borrowers avoid delinquency or default.
You may be able to temporarily defer your payments or reduce your payments altogether. For example, the following lenders offer alternative payment options:
College Ave borrowers may be eligible for up to 12 months of hardship forbearance.
Sallie Mae allows some borrowers to defer payments if they are returning to school or taking an internship or residency.
The Rhode Island Student Loan Authority (RISLA), which provides loans to borrowers nationwide, is one of the only private student loans lenders with an income-based repayment option.
5. Consider refinancing
If you have high-interest private student loans and want to pay them off as soon as possible, student loan refinancing can be a useful strategy. Depending on your credit score and debt-to-income (DTI) ratio, you may qualify for a loan with a lower rate than you currently have, which will help you save money and pay off your private student loans faster.
For example, let’s say you had $40,000 in private student loans at 6% interest and a 10-year repayment term. If you refinanced your loan and qualified for a seven-year term at 4% interest, you’d save more than $7,300 in interest charges—and pay off your loan three years earlier than originally scheduled. You can use a student loan refinancing calculator to see how much you can save by refinancing your debt.
To get the best rate, shop around and get quotes from multiple student loan refinancing lenders.
Although private student loan forgiveness is not an option, there are various programs that can help you pay off your debt. You may also be eligible for alternative payment plans or student loan refinancing to pay off your debt faster. If you’re having trouble making your payments or need help figuring out your repayment plan, contact your lender to discuss your options.
What to do if you need private student loan forgiveness
Although private student loan forgiveness programs do not exist, you have other options. Here’s what you can do if you have private student loans and need to find some breathing space.
1. Talk to your lender
2. Refinance your private student loans
3. Explore private student loan repayment assistance programs
4. Optimize your federal loan (if you have one)
5. Look for updates on private student loan forgiveness
6. Find new ways to increase your income