Private Student Loan Forgiveness: How it Works

#1 Student loan lawyer

Updated on January 23, 2024

Hoping for private student loan forgiveness is common among borrowers who find it hard to pay back their loans. This hope has grown because the Biden administration has created many forgiveness programs for federal student loan borrowers. Sadly, these programs don’t help with loans from private lenders like Sallie Mae, SoFi, and Discover

Why is it different for private loans? It’s because the rules and options for federal and private student loans are not the same.

Borrowers with federal loans have several ways to get their loans forgiven. Programs like Public Service Loan Forgiveness and the one-time payment count adjustment have already erased over $136 billion in loans for about 3.7 million people. The federal government does this because it has a responsibility to Americans it helped push into staggering amounts of student loan debt in its efforts to have a highly educated workforce.

On the other hand, private student loan lenders focus on making money. Their goal is to give loans with competitive interest rates and repayment terms to people who have strong credit scores. They do this to earn profits for their shareholders. Because of this focus on the bottom line, private student loan forgiveness is limited to extreme circumstances like permanent disability or death. Banks and credit unions expect you to make your monthly payments no matter your financial hardship.

Ahead, we’ll review options for private student loan forgiveness and discuss other ways you can make your monthly payments more manageable if forgiveness isn’t an option.

Related: How to Apply for Student Loan Forgiveness


Alternative Relief Options for Private Loans

Though formal forgiveness programs are scarce for private loans, borrowers still have several avenues for relief.

  • State-Sponsored Assistance: Various states offer loan repayment assistance programs to individuals in specific professions, such as healthcare and law. Eligibility criteria differ by state and profession.

  • Refinancing Options: Those with strong credit profiles might get lower interest rates through refinancing. Lenders often offer both fixed and variable interest rate options. For more details, refer to our guide on student loan refinancing.

  • Negotiating a Settlement: If you’ve defaulted on your loan, some private lenders may agree to a settlement. Terms can vary, but student loan settlements often range from 40-70% of the current loan balance, payable either as a lump sum or through installment payments.

  • Using 529 Plan Funds: Federal law allows for the use of remaining funds in a 529 college savings plan to repay up to $10,000 in qualified education loans. These funds can also be given to a beneficiary or their sibling.

  • Disability and Death Provisions: Some lenders offer loan cancellation in cases of permanent disability or death of the primary borrower. But cosigners may still be held responsible sometimes.

  • Bankruptcy Discharge: While challenging, it’s possible to discharge private student loans through bankruptcy. This involves filing a Chapter 7 or Chapter 13 bankruptcy, followed by an adversary proceeding to prove undue hardship.

Related: Why Can’t You File Bankruptcy On Student Loans

Managing Private Student Loan Debt: What Are Your Options?

While the cancellation of private student loans is rarely an option, there are several strategies to ease the financial burden.

Redirect Payments from Federal Loans

If you have both federal and private loans, consider pausing or reducing federal loan payments and reallocating those funds to your private loans. This approach is beneficial for two reasons: private loans often have higher interest rates, and they offer fewer affordable repayment plans. While this will increase your federal loan balance due to accruing interest, you can later benefit from federal repayment plan forgiveness after 240 qualifying payments.

Consider Refinancing

Refinancing can be useful if you have high-interest federal loans like Parent PLUS Loans. To qualify for the best rates, you’ll need a strong credit profile and enough income. Use platforms like Credible to compare loan terms across multiple lenders.

Note: Transferring a federal loan to a private lender will disqualify it from Public Service Loan Forgiveness and income-based repayment plans.

Explore Lender-Specific Repayment Plans

Many private loan servicers offer temporary relief options like interest-only payments, deferments, or forbearances. Deferment is generally available if you return to school or serve in the military, while forbearance is an option during financial hardship, such as job loss or medical emergencies.

Related: How to Lower Private Student Loan Payments

You may have other options to lower your monthly bill. Contact your student loan servicer to learn your options.

Private Student Loan Forgiveness Programs

Loan Servicer

Death of Borrower

Death or Disability of Cosigner

Disability of Borrower

Contract for More Info

Balance Waived

Borrower Responsible

Contact for Info


Balance Waived

No Effect

Balance Waived


Balance Waived


Balance Waived


Contact for Info

Cosigner May Be Liable

Some Loans Waived


Balance Waived

Borrower Responsible

Contact for Info


Balance Waived

Borrower Responsible

Balance Waived


7. SoFi

Balance Waived

Borrower Responsible

Contact for Info


Why Private Loans Rarely Offer Forgiveness

Banks, credit unions, and other financial institutions are the main issuers of private student loans. They operate with profit in mind. They assess borrowers’ creditworthiness and adjust interest rates to mitigate risk. This focus on profitability explains why they seldom forgive loans.

Contrast this with Federal Objectives

The federal government operates under different imperatives. Its role is not just to ensure loan repayment but also to make higher education accessible to all. This is clear in programs like Pell Grants and the availability of federal loans, despite credit scores.

Incentives for Public Service

The government also aims to attract skilled individuals to critical sectors like education, healthcare, and legal services in underserved areas. To achieve this, it offers various income-driven repayment plans and specialized forgiveness programs, such as Teacher Loan Forgiveness and Public Service Loan Forgiveness.

Be Cautious of Scams

As pandemic-related relief measures wind down, fraudulent schemes targeting federal student loan borrowers especially are on the rise. Be wary of claims promising immediate loan cancellation through non-existent programs like ‘Biden Loan Forgiveness’ or ‘CARES Act Loan Forgiveness.’

While the Department of Education has expanded forgiveness for specific groups, these changes do not apply to private loans. If you’re approached for personal information or payments for loan cancellation, it’s likely a scam.

If you’ve been approached with a scam, contact the Consumer Financial Protection Bureau. The CFPB can help protect you and other consumers by shutting down scam artists looking to take advantage of the noise surrounding student loan forgiveness.

Bottom Line

Various strategies can help you manage your private student loan debt. If you’re seeking expert guidance, our team specializes in helping borrowers with both federal and private loans.

Sometimes that means finding ways to get a lower monthly payment with student loan refinance lenders. Other times it means exploring forgiveness options. And still other times it means negotiating a settlement or exploring bankruptcy as a solution.

Schedule a consultation today, and let’s collaborate on a plan tailored to your future goals.

Share On Social

Stop Stressing


Is there hope for private student loan forgiveness?

No, there likely isn't hope for government-initiated private student loan forgiveness in the near future. While federal loan forgiveness has seen progress, private loans remain mostly unaffected. But it's important to stay updated on potential legislative changes that could influence policies around private student loans.

What Is the Tax Impact of Loan Forgiveness Under the American Rescue Plan?

The American Rescue Plan, signed by President Biden, exempts student loan debt cancellation from federal taxation from 2021 to 2026. This means any forgiven student loan debt during this period won’t be considered taxable income by the IRS.

Are Private Student Loans Eligible for PSLF?

Private student loans do not qualify for federal forgiveness programs like Public Service Loan Forgiveness. These loans cannot be consolidated into a Direct Consolidation Loan, thus lacking any mechanism to convert them into federal loans eligible for such forgiveness options.

Newsletter side module illustration

Overwhelmed by your Loans?

Get my guide to clearing student loan debt

4.8/5 from 120+ downloads