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Private loans tend to have higher interest rates for most borrowers, and there are generally fewer repayment plans and hardship options than federal loans.
If you’re struggling with your student loan debt, you might be wondering if private student loan cancellation is an option. Unfortunately, private loans are not eligible for most forgiveness programs. However, there may be other sources of assistance for private student loans.
Can Private Student Loans Be Forgiven?
With regard to student debt, you have either federal loans or private loans. Federal loans are issued by the US Department of Education, while private student loans come from banks, credit unions, or online lenders. This difference is the reason why private student loan cancellation is so unattainable.
While federal loans are eligible for programs such as Public Service Loan Forgiveness (PSLF), private loans are not. Since private student loans are issued by individual companies rather than the government, it would require congressional legislation to enact general remission measures. And, any measure would likely have to allocate funds to pay lenders on behalf of borrowers rather than just absorb the cost, making forgiveness measures unlikely.
The only cases where private student loans can currently be canceled are in the event of death or permanent disability, but even then release usually depends on your lender’s policy.
5 ways to get help with a private student loan
While private student loan forgiveness is not available, there are other ways you can get help paying off your debt. By using these five tips, you can make your loans more manageable.
1. Career-focused student loan repayment programs
Although federal employment-based forgiveness programs are not available to private loan borrowers, you may be eligible for repayment assistance programs depending on your career. These programs are typically run by state governments or professional associations and will repay a portion of your loans in exchange for a commitment to work in an area of great need.
Careers generally eligible for these programs include nurses, physicians, dentists, teachers, and lawyers. Consider these examples:
- Nursing Corps Loan Repayment Program. Under this program, you can have up to 85% of your loans repaid if you are a registered nurse, advanced practice registered nurse, or nursing faculty member. To be eligible, you must commit to working at a designated facility in the event of a critical shortage.
- New York State Teacher’s Loan Surrender. If you are a teacher in New York City and work in an elementary or secondary school, you may be eligible for student loan repayment assistance of up to $ 20,000. Under the rules of the program, you must agree to teach in a hard-to-hire area or to teach a high-need subject.
- Florida Bar Loan Repayment Assistance. This program provides student loan assistance to lawyers employed by legal aid organizations that receive grants. Under the program, eligible lawyers can receive up to $ 5,000 per year to repay their loans.
To find out if you are eligible for student loan assistance programs, contact your national education agency or professional association.
2. Repayment assistance depending on location
If you are ready to relocate 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 relocate to certain locations. For example:
- Kansas Rural Opportunity ZonesPeople moving to designated rural areas in Kansas can receive up to $ 15,000 in student loan repayment assistance from the state. Plus, you might also be eligible for an income tax exemption, making the move even more beneficial.
- Maine opportunity. University graduates who attended a Maine school and decide to live and work in the state can have their student loan payments reimbursed through income tax credits, up to an annual maximum.
- Maryland SmartBuy. The Maryland SmartBuy program helps borrowers pay off student debt and become homeowners. Through the program, eligible applicants can get up to 15% of the purchase price of their home to pay off student debt (up to a maximum of $ 30,000).
Check with your state commerce department to see if there is a similar program in your area.
3. Find an employer who offers a student loan repayment
A growing number of employers are helping their employees pay off their student loans. Big companies like Estée Lauder, SoFi, and Hulu will pay off a portion of your student loans as an added benefit, up to an annual or lifetime maximum. Talk to your human resources department to find out if your business has an employer student loan assistance program.
4. Contact your lender
If you’re having trouble with your payments, contact your lender. Even though private student loans are not eligible for loan cancellation or income-based repayment (IDR) plans, lenders often have their own programs to help borrowers avoid default or default.
You may be able to temporarily postpone your payments or reduce your payments as a whole. For example, the following lenders offer alternative repayment options:
- College Avenue. College Ave borrowers may be eligible for a forbearance period of up to 12 months.
- Sallie mae. Sallie Mae allows some borrowers to defer payments if they return to school or undertake an internship or residency.
- Rhode Island Student Loan Authority (RISLA). RISLA, which lends to borrowers across the country, is one of the only private lenders to offer an income-tested repayment option.
5. Consider refinancing
If you have high interest private student loans and want to pay them off as quickly as possible, student loan refinancing can be a useful strategy. Depending on your credit score and your debt-to-income ratio (DTI), you may be eligible for a loan at a lower rate than you currently have, which will help you save money and pay off your student loans more. quickly.
For example, let’s say you had $ 40,000 in student loans at 6% interest and a 10-year repayment term. If you refinanced your loans and qualified for a seven-year term at 4% interest, you would save over $ 7,300 in interest charges and pay off your loans three years earlier than originally planned. You can use a student loan refinance calculator to see how much you can save by refinancing your debt.
To get the best rate, shop around and get quotes from several student loan refinance lenders.
While private student loan cancellation is not an option, there are a variety of 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 with your payments or need help understanding your repayment plan, contact your lender to discuss your options.
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