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Can Private Student Loans Be Forgiven?


Blog Author ProfilePeppyWallet Editorial Team
Posted on August 31, 2019
PeppyWallet aims to help you make the best financial decisions when it's time to make them. In order to help maintain our platform and services, some or all of the products featured in this post are from our Product Partners. Our opinions however, are our own, and featuring specific products does not influence our analysis.
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Editorial Note: This content is neither commissioned nor provided by any financial institution. Any analyses, reviews, opinions, or recommendations that are expressed in this article are those of the author's alone, and may not have been approved, endorsed or reviewed by the financial institution(s) mentioned in this post.

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.



Here are some of the best refinance lenders


Lender
Variable APR
Earnest
2.14-6.79%1
CommonBond
2.41-7.95%2
LendKey
2.24-6.67%3

1Important Disclosures for Earnest

To qualify, you must be a U.S. citizen or possess a 10-year (non-conditional) Permanent Resident Card, reside in a state Earnest lends in, and satisfy our minimum eligibility criteria. You may find more information on loan eligibility here: https://www.earnest.com/eligibility. Not all applicants will be approved for a loan, and not all applicants will qualify for the lowest rate. Approval and interest rate depend on the review of a complete application.

Earnest fixed rate loan rates range from 3.45% APR (with Auto Pay) to 7.49% APR (with Auto Pay). Variable rate loan rates range from 2.14% APR (with Auto Pay) to 6.79% APR (with Auto Pay). For variable rate loans, although the interest rate will vary after you are approved, the interest rate will never exceed 8.95% for loan terms 10 years or less. For loan terms of 10 years to 15 years, the interest rate will never exceed 9.95%. For loan terms over 15 years, the interest rate will never exceed 11.95% (the maximum rates for these loans). Earnest variable interest rate loans are based on a publicly available index, the one month London Interbank Offered Rate (LIBOR). Your rate will be calculated each month by adding a margin between 1.82% and 5.50% to the one month LIBOR. The rate will not increase more than once per month. Earnest rate ranges are current as of September 5, 2019, and are subject to change based on market conditions and borrower eligibility.

Auto Pay discount: If you make monthly principal and interest payments by an automatic, monthly deduction from a savings or checking account, your rate will be reduced by one quarter of one percent (0.25%) for so long as you continue to make automatic, electronic monthly payments. This benefit is suspended during periods of deferment and forbearance.

The information provided on this page is updated as of 08/15/2019. Earnest reserves the right to change, pause, or terminate product offerings at any time without notice. Earnest loans are originated by Earnest Operations LLC. California Finance Lender License 6054788. NMLS # 1204917. Earnest Operations LLC is located at 302 2nd Street, Suite 401N, San Francisco, CA 94107. Terms and Conditions apply. Visit https://www.earnest.com/terms-of-service, email us at hello@earnest.com, or call 888-601-2801 for more information on our student loan refinance product.

© 2018 Earnest LLC. All rights reserved. Earnest LLC and its subsidiaries, including Earnest Operations LLC, are not sponsored by or agencies of the United States of America.

2Important Disclosures for CommonBond

Offered terms are subject to change. Loans are offered by CommonBond Lending, LLC (NMLS # 1175900). If you are approved for a loan, the interest rate offered will depend on your credit profile, your application, the loan term selected and will be within the ranges of rates shown. All Annual Percentage Rates (APRs) displayed assume borrowers enroll in auto pay and account for the 0.25% reduction in interest rate. All variable rates are based on a 1-month LIBOR assumption of 2.37% effective July 10, 2019.

3Important Disclosures for LendKey

Refinancing via LendKey.com is only available for applicants with qualified private education loans from an eligible institution. Loans that were used for exam preparation classes, including, but not limited to, loans for LSAT, MCAT, GMAT, and GRE preparation, are not eligible for refinancing with a lender via LendKey.com. If you currently have any of these exam preparation loans, you should not include them in an application to refinance your student loans on this website. Applicants must be either U.S. citizens or Permanent Residents in an eligible state to qualify for a loan. Certain membership requirements (including the opening of a share account and any applicable association fees in connection with membership) may apply in the event that an applicant wishes to accept a loan offer from a credit union lender. Lenders participating on LendKey.com reserve the right to modify or discontinue the products, terms, and benefits offered on this website at any time without notice. LendKey Technologies, Inc. is not affiliated with, nor does it endorse, any education institution.


The team members at PeppyWallet pride themselves in finding and suggesting services and products that they believe are of high quality and have the potential to positively change a student loan borrower's financial circumstances. We may earn an advertising fee or sales commission when we recommend various services and products to you, which is how we maintain our site and education platform. Be sure to read the fine print to help you understand your product's or service's terms and conditions. PeppyWallet is not an investment advisor or lender, and is not involved in the investment or loan approval process, and does not make investment related or credit decisions. Any terms and rates which are listed on our website are our latest estimates but are subject to change at any time, and we cannot guarantee that they are up-to-date.