Private Student Loan Forgiveness: Your Options and Alternatives

Amid the COVID-19 pandemic, the federal government paused all federal student loan payments and interest charges to help borrowers. While this didn’t impact private student loans directly, the federal student loan pause made it easier for many borrowers to focus on paying their private loans.

With the pandemic waning, the Biden administration didn’t extend the freeze and federal student loan payments will resume in September 2022. This could stress borrowers who are still struggling, putting them behind on their private student loans.

This may leave you wondering if there are any private student loan forgiveness programs, like those available for federal loans, and what other options you may have. We’ll cover this and more below.

What nationwide student loan forgiveness options are there?

For federal student loans, there are plenty of student loan forgiveness options. Let’s explore the current forgiveness options.

• Public Service Loan Forgiveness (PSLF): After making 120 payments to your student loans, the PSLF program will forgive 100% of your remaining loan balance if you’re employed by a government or not-for-profit organization.

• Teacher Loan Forgiveness: Teachers who’ve completed five consecutive years of teaching at a low-income elementary school, secondary school or educational service agency are eligible to have up to $17,500 or their Direct Student Loan or FFEL Program student loan forgiven.

• Closed school discharge: If you took out a Direct Student Loan, FFEL Program loan or a Perkins Loan to attend a school and that school closes while you’re attending or shortly after leaving school, you may be eligible for loan forgiveness.

• Perkins Loan cancellation and discharge: Teachers, child or family services workers, firefighters, law enforcement officers and other professionals may have their federal Perkins Loans canceled or discharged if they meet specific requirements.

• Total and permanent disability discharge: Direct Loans, FFEL Program loans and Perkins Loans may be discharged due to total and permanent disability.

• Discharge due to death: If the borrower or student dies, a Direct Loan, FFEL Program loan or Perkins Loan will be discharged.

• False certification discharge: If your school falsely certified your eligibility for a Direct Loan, FFEL Program loan or Perkins Loan, you may be eligible for a discharge.

• Unpaid refund discharge: If your school failed to return unused loan funds to the loan servicer after you withdrew from school, you may be eligible for a loan discharge in the unused, unreturned amount.

• Forgery discharge: If any portion of your loan documents were forged with an intent to defraud, you may be eligible to have your Direct Loans, FFEL Program loans or Perkins Loans discharged.

Forgiveness options for private student loans are far narrower because these loans are issued by private companies, whereas the U.S. Department of Education issues federal student loans. The U.S. government can simply absorb those loan costs but would have to repay a loan-issuing company in the case of private student loan forgiveness.

The only time a private student loan may be forgiven is in the case of the borrower's death or permanent and total disability. However, even this policy varies by lender and isn’t guaranteed.

Alternatives to private student loan forgiveness

Other than the borrower's death or total and permanent disability, there are no loan forgiveness options for private student loans but there are other ways to get relief if you’re struggling to repay your private student loans.

Reach out to your private student loan lender

Student loan lenders would prefer to help you through a rough patch than allow your student loan to become delinquent. So, if you’ve hit a point where you can no longer afford your student loan payments, contact your student loan lender. Let them know about your financial hardship and ask what options they offer.

While private student loan borrowers don’t qualify for the same income-driven repayment plans federal student loan borrowers do, the lender may have programs to help you remain current, such as forbearance, payment deferment, reduced interest rates or even their own income-based repayment plan.

Look into state student loan repayment assistance programs

While the federal government doesn’t have assistance programs for private student loans, some states offer private student loan forgiveness programs and repayment assistance. You’ll want to call your state education department to see what’s available and determine your eligibility, but some of the more popular programs are as follows.

New York Teacher Loan Forgiveness Program

If you reside in New York state and teach in a hard-to-staff district or teach a subject with a teacher shortage, you can receive up to $5,000 per year in student loan forgiveness for up to four years.

Florida Bar Loan Repayment Assistance Program

If you are employed full-time — or at least 50% of full-time — as a staff attorney in Florida, you may be eligible for a $5,000 grant from the Florida Bar’s Loan Repayment Assistance Program (LRAP). This $5,000 grant is issued as a loan once every calendar year, but the loan is also forgiven annually if you meet all the eligibility requirements.

Kansas Rural Opportunity Zones

If you move to a participating county in Kansas, you could be eligible for up to $15,000 in student loan repayment assistance over five years. As a bonus, you may also be eligible for a 100% waiver on all Kansas income tax too.

Opportunity Maine

If you earned a degree from a college in Maine, reside in Maine and meet other requirements, you can receive state tax credits and direct payments to help cover your student loan payments under the Opportunity Maine program.

Maryland SmartBuy

The Maryland SmartBuy program will provide student loan borrowers up to 15% of the purchase price of a home (up to $30,000) to apply to their outstanding student loans.

Check for employer student loan repayment

Another way to manage private student loans instead of forgiveness is to find an employer that offers student loan repayment assistance. Some employers will pay off at least a portion of your student loans, despite you not working with the company while attending school.

This could even be a benefit at your current job that you don’t know about, so check with your human resources department to find out if they have employer repayment options.

Consider a student loan refinance

Another option is to refinance your private student loan debt into a loan with a lower interest rate or one with a longer repayment term. The resulting lower payment can help you remain current and alleviate some of the pressure on your monthly budget.

You can also use refinancing as a form of consolidation, turning multiple private student loan payments into just one while also enjoying an overall lower interest rate.

However, remember that not all loans you refinance into will be considered a student loan. Some might be considered personal loans, and this means you’ll lose the income tax deduction you get for the interest paid on student loans.

As a private loan, you could lose other benefits your private student loan servicer offers, such as forbearance or hardship assistance. Always compare the hardship options between your current private lender and the lender you’re considering using for a refinance before signing up for student loan refinancing.

Also, keep in mind that you may need a co-signer to get a rate better than what you already have, especially if late payments are reported and have damaged your credit score.

Private student loan forgiveness isn’t available, but you have options

Though private student loan forgiveness isn’t available like it is for federal student loans, there are other options when financial hardship strikes. This includes programs your lender may offer, using state-backed repayment assistance programs, using your employer's education benefits or refinancing.

Regardless of which options are available to you, it’s important to take advantage of these programs as soon as possible to avoid potential late payments that can hurt your credit score.

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