If you find yourself burdened with private student loans from your bachelor’s or master’s degree and feel like you can’t make any progress, you may be searching for programs that offer student loan forgiveness for private student loan debt.
Regrettably, private student loan borrowers don’t have access to the same benefits and repayment plans that federal student loan borrowers have.
Sallie Mae loans, Discover loans, and other private student loans cannot be forgiven. In fact, there are no official student loan forgiveness programs available for any private student loan company.
Federal student loan borrowers have options like the Public Service Loan Forgiveness (PSLF) and Teacher Loan Forgiveness programs to eliminate their debt. Another choice for federal student loan borrowers is pursuing student loan forgiveness through income-driven repayment (IDR) plans, which can also make loan repayment more manageable.
The Biden Administration has proposed canceling $10,000 to $20,000 of student loans for all borrowers. However, this only applies to federal student loans, and it remains uncertain if the Supreme Court will ultimately approve this proposal.
Private student loan borrowers have no such relief.
But before you give up or succumb to despair over your loan amount, here are some other options to consider.
Download Our New IDR Calculator
1. Postpone your student loan payments
If you’re seeking private student loan forgiveness, chances are you’re struggling with your loan payments after your grace period ends.
Unlike federal student loans, private lenders do not offer income-driven repayment plans to make your payments more manageable and affordable. However, you may be eligible for deferment.
For example, if you’re looking for Sallie Mae student loan forgiveness, although forgiveness is not an option, they do offer deferment for student loan borrowers. During deferment, you can temporarily reduce or pause your payments.
The advantages of deferment
Sallie Mae offers deferment for undergraduate and graduate students, which can lower your payments for up to 48 months. If you’re in a residency program or internship, you may not have to make payments and can apply for a deferment for up to 12 months at a time, with a maximum of 48 to 60 months, depending on your loan type.
Discover Student Loans also has a deferment program with various options available. They also offer a reduced monthly payment option that can lower your interest rate and provide additional assistance during difficult times.
Keep an eye on accruing interest
It’s important to note that while your payments may be lower or paused during deferment, interest will continue to accumulate. Be aware of how this can affect the total cost of your loan. The accumulating interest can have a significant impact on your student loan balance.
We mentioned Sallie Mae and Discover, two of the top private student loan lenders, but deferment options can vary by lender. If you have private loans with a different lender, contact them as soon as possible to inquire about deferment options, if any.
If you decide to pursue deferment, talk to your lender about the process, and make sure to calculate the additional cost it may add to your loan.
2. Apply for forbearance
What if you’re not a student or part of an internship or residency? If you fall into this category and are seeking private student loan forgiveness or other forms of assistance, you can apply for forbearance with your lender.
Sallie Mae used to have a forbearance program for borrowers facing difficulties in making payments, but their policy has changed. If Sallie Mae is your lender for undergraduate or graduate loans and you need forbearance, contact them and continue making on-time payments until anything is approved.
Discover Student Loans also has a forbearance program that allows up to 12 months of forbearance. However, those 12 months cannot be consecutive.
How to apply for forbearance
If you wish to apply for forbearance, get in touch with your lender to explore available options and the application process. It’s essential to be aware of any time limitations or requirements for goodwill payments, particularly when dealing with Sallie Mae.
While your payments are on hold, interest will likely continue to accrue, which will further increase your student loan balance.
Before choosing this option, carefully consider the cost of interest and any goodwill payments. Also, keep in mind that there is a finite number of months that you can postpone payments. Therefore, make sure you genuinely need forbearance. If you do, it can certainly provide some relief.
3. Investigate refinancing
Is your interest rate too high? Do you want to change your monthly payment, loan repayment options, or overall loan terms? If so, student loan refinancing is a viable option worth considering.
Refinancing companies offer loans with lower interest rates for both private and federal student loan debt. You can also choose the term of your loan, which can impact the amount of your monthly payments.
Pros and cons of refinancing
Refinancing may or may not be the ideal solution based on your circumstances. If you’re struggling to make payments, you might not meet the eligibility criteria, making it a poor fit. Refinancing companies want assurance that you can meet your payment obligations. This often requires a good credit history or a co-signer.
If you have good credit and sufficient income to support the loan, refinancing can potentially save you thousands of dollars in interest by reducing your interest rate. The money you save can then be used to pay down your principal student loan balance.
We offer student loan refinancing options that come with cash back bonuses. In most cases, checking your prospective rate will not impact your credit score, as it generally does not involve a hard credit check until you submit an application. You can compare variable rates and fixed rates, as well as different repayment terms, if you choose this route. Additionally, watch out for any origination fees or other types of fees.
If your private student loans are causing extreme hardship and you’re barely getting by, possibly relying on credit cards, you may be a candidate for bankruptcy. It’s a common misconception that student loans cannot be discharged in bankruptcy, but while it is challenging, it’s not impossible.
Discharging student loans through bankruptcy
To have your student loans discharged through bankruptcy, you must demonstrate “undue hardship” and provide supporting documentation with the assistance of legal counsel. Undue hardship typically means you are insolvent and that repaying your education loan significantly and adversely affects your life.
You must also demonstrate that you’ve made good faith efforts to repay the loan and provide evidence that this burden will have a long-lasting impact on your financial situation.
Keep in mind that filing for bankruptcy incurs costs, and there are long-term consequences for your credit.
After declaring bankruptcy, your credit score will take a significant hit, making it difficult to obtain credit in the months or years following. Chapter 13 bankruptcy stays on your record for seven years, while Chapter 7 bankruptcy remains for 10 years.
Bankruptcy should only be considered as a last resort and needs to be thoroughly evaluated. It’s not a solution without consequences. However, if you’re facing extreme depression or thoughts of suicide due to your private student debt, or if the pandemic has severely impacted your employment and personal finances, it may be an option worth considering.
Total and permanent disability and death discharge programs
Total and permanent disability discharge programs offer loan discharge or cancellation for individuals who become completely disabled and are no longer able to work. Depending on your loan servicer and loan terms, you may qualify to have the remaining balance forgiven.
Private student loans can also be discharged in the event of the primary borrower’s death. If you are a cosigner on a loan and the borrower passes away, whether permanent discharge is granted is at the discretion of the loan servicer.
Unlike federal student loans with the Department of Education, private student loan discharge and forgiveness due to total and permanent disability or death vary by lender.
Private student loan forgiveness
While traditional private student loan forgiveness programs do not exist, there is assistance available for private student loan borrowers in certain circumstances. The key is to contact your lender immediately if you’re facing difficulties and explore the available options. Taking proactive action is crucial to avoid delinquency or deferment, which can damage your credit. So if you’re struggling with your student loan payments, take action today.
Contributions to this article were made by Caitlin See.
Have you utilized any of these alternatives to private student loan forgiveness?
Get a personalized student loan plan