Today, federal and private loans are critical parts of millions of students’ lives. It is an undeniable fact as studying in a college involves a number of expenses. This includes tuition fees, cost of teaching materials, accommodation, and so on. Sometimes, students do not want to pay their loans back. It might be due to several reasons like low income. For such cases, federal student loan forgiveness programs exist. Students get their loans forgiven fully or partially in return for serving the government. They can work at schools as teachers or in any qualifying public institution for the same purpose. Is private student loan forgiveness possible just like a federal one? The bitter truth is it is either extremely difficult or impossible. In this article, we will describe private student loan forgiveness in detail. If you are also one of the private loan takers, make sure you read this post carefully.
Why is Private Student Loan Forgiveness challenging?
You may wonder if private student loan forgiveness is possible, why is it difficult? The answer is simple. Federal student loan forgiveness programs exist because the government offers them. In other words, in return for federal loan forgiveness, you work for a public service agency or a school that belongs to the state. Since the government needs employees in those institutions, they agree to forgive your loan. You must not forget that you contribute to your country and society as a result of this service.
Nevertheless, there is no such incentive for private lenders. They do not care if you receive high-quality education or work in Google after graduation. All they care about is money. The money that they lent you, which they look forward to getting back with high-interest rates. As well as, because lenders know the students will be unable to have their loans discharged during bankruptcy. So, they do not find any incentive or obligation to propose forgiveness or discount.
Is it possible to realize private student loan forgiveness?
The answer to the above question is yes. However, it does not mean you will be willing to get private student loan debt settlement to happen through one of the below ways. The initial one of those forgiveness ways is death. Precisely speaking, the death of the loan taking a student. It is something unpleasant to think. Still, you can see this term in private loan agreements. The loan is forgiven upon the death of the primary loan taker as per the contract. In case you are a co-signer of a taken loan, you may or may not be eligible for forgiveness. Ideally, you have to discuss the situation with the lender in such cases. Some lenders erase the loan for co-signer, too, yet others require co-signer to pay it. In short, this type of forgiveness is probably something no student wants to have as a loan relief.
Permanent or Complete Disability
The death of the borrower is not the only way for private student loan forgiveness. Another feasible yet undesirable way is becoming completely or permanently handicap. Some of the private lenders forgive the loans they give in such cases. However, it does not apply to all lenders. Most of them still prefer to forgive loans on the grounds of borrowers’ death. In such circumstances, if you face an unfortunate permanent disability, your co-signer may always be liable for the debt. For this option, what is best is to contact your lender and discuss it with them.
Possibility in case your lender deceives you
It is, in fact, illegitimate for colleges to give false promises to their students. Such guarantees include a specific salary or kind of job. It is, in particular, worse when you, trusting the college, take a loan to pay for your studies. During the presidency of Obama, the US government took legal actions against such colleges. The leading institutions implementing measures were The US Department of Education and the Consumer Financial Protection Bureau (CFPB). One of such colleges was Corinthian College. So, it was shut down in 2015. Though mainly federal loans are erased in such cases, it is also feasible that they will forgive your private student loan. In the case of Corinthian Colleges student loan forgiveness, they gave loans worth hundreds of millions of dollars. They were called “Genesis” loans. So, if you are one of those “Genesis” loan takers, you may get involved in that student loan forgiveness program. Here, you are supposed to get a letter stating your qualifications for forgiveness. CFPB should send the message.
The Case of DeVry University
Another such case was the case of DeVry University. The management of this university also made false promises. One of them is that 90% of them will get a job within six months after graduation. Also, they had promised their students that they would receive 15% more salary than other universities’ graduates. In 2017, after the investigation of the Federal Trade Commission, loans taken between 2008 and 2017 were forgiven. Nevertheless, the loans that private banks had lent to students were not on the list of private student loan forgiveness. So you can check the DeVry University Student Loan Forgiveness Program, too, to see if it applies to you.
In case your lender is unable to prove
Even though this is an unlike situation, it is still possible. A vivid example of this belongs to the National Collegiate Students Loan Trusts. They had a lot of debt to collect, and they were suing students to be able to get the money back. In 2018, CFPB achieved to inspect this entity through a neutral auditor. Almost 1,000,000 loans were supposed to be checked. The result was a few thousand of those loans were erased. It was because there were not sufficient paper proofs available to show. In case you have a loan belonging to years before 2007, you can check out this option, too.
The above-given options are all that may earn you private student loan forgiveness. However, there are some different ways to help you with your payments. One of them is Forbearance. Forbearance pauses your obligation to pay the loan back. Usually, you can take 12 months for student loan forbearance. It is generally applied in times of financial difficulties. A negative side of Forbearance is the interest will keep accruing on it. Still, you get some time until you have to start paying back again. So, it is up to you to decide if this choice works for you.
Another option is refinancing your loans. It is more typical for you if you have enough income to pay your loans, yet your payments are heavy to pay. In other words, if the interest you are paying is too big, you can refinance your loans. By this, you will be able to decrease it substantially. You can also extend your payment duration to make it even more flexible to pay.
In brief, private student loan forgiveness is possible in extreme cases, such as death or disability. Such cases do not likely interest you to pay back your loan. So, consider benefiting from other methods, as mentioned above, to get your private loans forgiven.