Can private student loans be forgiven? It is true that just like federal student loans, private student loans cannot be forgiven, but borrowers however have other options for saving money.
Can Private Student Loans Be Forgiven
Private student loans normally make up for about 7.6% of the trillion-dollar student loan industry as per MeasureOne, a data exchange platform and company. But away from that, private student loan borrowers carry a sum total of more than $123 billion share of the total student loan debt in America. The broad student loan forgiveness that was announced by President Joe Biden on August 4 however does not apply to private student loans as private lenders fund them and not the federal government.
If you are one of the many with private student loans, then you can take strategic steps to help you manage your payments, lower their cost and even pay them off faster and this is including refinancing.
Can You Get Private Student Loan Forgiveness
You should know that independent and government student loan forgiveness programs do not apply to private student loans as only federal student loans can be forgiven.
Your private student loan lender can however offer some type of relief for borrowers in financial distress. You may be able to get in contact with your lender and then request a payment pause, a lower interest rate, or a payment amount. But all of these measures will be temporary and the interest will continue to accrue during the whole relief period.
Can Bankruptcy Cancel Private Student Loan
While federal student loans cannot be discharged via bankruptcy, private student loan debt on the other hand can. The process however can be more difficult that discharging other types of debt such as credit card debt.
Some certain types of private student loans may get to require borrowers who file for bankruptcy to demonstrate really extreme financial hardship and then go through an extra step that is known as an adversary proceeding by the Consumer Financial Protection Bureau. You should also know that certain education loans are treated as other types of unsecured loans, and the CFPB has stated that these include;
- Loans are taken by borrowers who attend school less than half the time.
- Loans that are paid directly to the borrower for an amount that is higher than the total cost of tuition, room, board, and books.
- Certain loans are taken to cover fees and living expenses all the while the borrower studies for the bar or other types of professional exams.
- Loans need to attend to unaccredited colleges, schools that are outside the US, unaccredited training and trade certificate programs, as well as other educational institutions that are not eligible for Title IV funding.
Alternative to Private Student Loan Forgiveness
Defaulting on student loans can have some serious reparations and consequences for both your finances and credit. If it is that you are struggling to repay your private student loans, then the only way to change your rate permanently as well as terms to something that is more manageable is via student loan refinancing.
With that being said, here are some of the many benefits of refinancing;
- Refinancing will give you the ability to streamline your payments simply by consolidating multiple student loans into one.
- You will get the ability to lower your monthly payment just by extending your payment period although this will very much likely mean a higher total interest cost.
- Refinancing will give you the opportunity to lower interest rates which will ultimately save you money over the life of the new loan, especially in the event that your credit has improved since you initially took out the loan.
- Refinancing will also give you the chance and opportunity to pay off your loan sooner simply by refinancing it into a shorter repayment term. You will get to save on interest in the long run, although it may mean that your monthly payments will likely be higher.
In the event that you are planning on refinancing your student loans, it is very important to consider various options from more than one lender.
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