You might have heard about someone you know who had their federal student loans forgiven in certain circumstances. Achieving federal student loan forgiveness is difficult but not impossible.
You could have your federal student loans forgiven if you choose a certain profession such as being a nurse, a healthcare professional or a lawyer. You could also achieve forgiveness through a Public Service Loan Forgiveness Program (PSLF) or under certain extreme circumstances such as permanent disability or death, victim or identity theft, or unauthorized signature of the loan by the school without your knowledge.
Private student loans, on the other hand, are extremely difficult to obtain forgiveness for. Since you've agreed to pay the private lender each month for the student loan, your private lender isn't obligated to have your loan cancelled, unless they previously stated in your origination or refinancing agreement to cancel or discharge your loans.
Some may offer the opportunity to cancel only a partial balance on your private loan and not the complete amount, but only in certain instances.
Unlike for various federal student loans, your private lender isn't obligated by law to help you if you ask about debt relief opportunities. Most private lenders offer death and permanent disability discharges, similar to what the federal government offers.
In limited circumstances, you may be eligible to have your private student loans forgiven through enforced state and federal actions, mainly for students who borrowed loans made by certain for-profit schools, such as Corinthian Colleges (Everest, Heald, and WyoTech).
If you were able to apply for and receive a federal disability discharge, your private lender should automatically forgive your student loans in most cases. We've outlined certain scenarios where you could potentially have your private student loans forgiven.
Disability Discharge
If you become permanently disabled, and you therefore are not able to work and provide for yourself, your private lender may potentially be able to forgive the loan balance in full. However, it's important that you review the specific policies and agreements associated with your private student loan.
For individuals who are disabled, many private institutions such Discover, Earnest, Wells Fargo and Citizens Bank, along with others, offer disability discharge clauses. Check with your private lender if they offer a disability discharge option, especially if you find yourself in an uncertain situation at some point down the road.
Death Discharge
In the case where you pass away, your loan terms should explicitly lay out whether or not your student loan debt is forgiven. In some unique circumstances, your estate might be legally obligated to take on your student loan liabilities on your outstanding balances up until your death, but usually, private lenders will forgive your student debt if you pass away.
Be sure to double check the fine print and terms of your student loan when you are refinancing or being issued a new loan for the first time, since it will explicitly lay out the terms and conditions.
If you happen to be a co-signer of a private student loan and the primary borrower on record passes away, it may be the case that you may be still required to continue to make payments until the student loan balance and interest has been entirely serviced.
Forgiveness Programs
If you have federal student loan, you could be eligible for the Public Service Loan Forgiveness program. Additionally, you may also be eligible to qualify for federal assistance from your state or certain private organizations.
The National Health Services Corps Loan Repayment Program may also allow you to qualify for a maximum of $50,000 in assistance to repay your student loans, if you work as a mental health provider or dental or licensed medical practitioner. You'll have to work full-time for at least two years in a community that is underserved, however.
Bankruptcy
If financial strain causes you to declare personal bankruptcy, certain debts such as your credit card balances can be forgiven, and depending on your circumstances, you may also have the opportunity to have your student loans be forgiven as well.
Financial stress in this scenario would most likely require you to provide proof of hardship, and that you are not able to maintain even a basic standard of living while simultaneously paying back your student loans.
Typically, however, having your student loans forgiven completely after declaring personal bankruptcy is substantially more difficult than having other types of personal debt extinguished.
Bankruptcy can have serious ramifications which can last for many years down the line, so it's important that declaring bankruptcy is a decision you take time to think about seriously.
Declaring personal bankruptcy can also cost you thousands in court fees and legal costs, and it's an option that should be used as a last resort.
Refinancing your private student loans
If you're wondering whether or not your private student loans can be forgiven, you're most likely in a position where you're trying to lower your monthly loan payments to keep up with living costs.
When you refinance your student loan, you are issued a new loan which replaces some or even all of your current loans. Your new private loan will have more favorable terms such as a higher repayment term and lower interest rate, which will allow you to now pay a lower monthly payment. Refinancing your student loans isn't a decision that can be made in an hour, so make sure you do your due diligence before you start submitting applications to private student loan borrowers.
