Private Student Loan Forgiveness: What Really Exists (and What Doesn’t)

Updated on September 11, 2025

There’s no such thing as private student loan forgiveness — at least not like the federal programs.

The only real exceptions are if you die, become permanently disabled, or if your lender cancels debt through a lawsuit or settlement.

When Private Loans Can Be Forgiven

Private student loans don’t come with broad forgiveness programs. Unlike federal loans, lenders aren’t required by law to cancel your balance. Still, there are a few limited situations where forgiveness might apply.

Death of the borrower

Most major private lenders — like Sallie Mae, College Ave, SoFi, Citizens, and Discover — cancel the loan if the borrower dies. That way, your family or co-signer usually isn’t stuck with the balance.

But forgiveness almost always applies only if the borrower dies, not the co-signer. If your co-signer dies or becomes disabled, you’re still responsible for the loan. Some older contracts even treated a co-signer’s death as a default — a policy most lenders have dropped, but it’s worth double-checking your loan agreement.

Permanent disability

Some lenders — like Sallie Mae and College Ave — cancel loans if you become totally and permanently disabled. But not all lenders offer this, and they’re not required to by law. You’ll need medical proof, and approval isn’t guaranteed, so check your lender’s process.

Navient’s school misconduct discharge

Navient runs a little-known program that cancels loans if you borrowed to attend a for-profit school that misled students, like ITT Tech, Westwood College, or the Art Institutes. You’ll need proof of misconduct, and approvals are rare. Many borrowers are denied at first and must reapply or file a CFPB complaint. But if you qualify, your loan can be wiped out completely.

Legal settlements

In 2022, Navient canceled $1.7 billion in private loans as part of a settlement with state attorneys general. These one-time events come out of lawsuits against lenders or schools — not programs you can sign up for. Other cases, like those tied to Corinthian Colleges and ITT Tech, also led to cancellations. These examples are rare, but they show forgiveness can happen when lenders or schools break the law.

Tax treatment

Normally, forgiven debt is taxable income. But through 2025, federal law makes student loan forgiveness — federal or private — tax-free under the American Rescue Plan. This applies if your balance is canceled due to death, disability, or settlement. Some states may still tax forgiven debt, so check your local rules.

Other Rare Situations

Private loan forgiveness is rare, but a couple of unusual situations are worth noting:

School fraud defenses. In some states, or under the FTC’s “Holder Rule,” you may have a legal defense if your school committed fraud. For example, if a lender worked closely with a for-profit school that lied about job placements or accreditation, you could argue in court that you don’t owe the loan. This isn’t automatic like federal borrower defense — it usually takes legal help — but it’s another option if your school misled you.
Small lender perks. A few lenders used to shave a tiny amount — about 1% — off balances if you graduated or made a set number of on-time payments. These perks are rare today and don’t make a real dent in your debt.

What To Do If You Can’t Get Forgiveness

If your loan doesn’t qualify for forgiveness, you still have ways to make repayment easier:

Talk to your lender

Ask about hardship options like temporary forbearance or interest-only payments. These aren’t always advertised, and interest usually keeps adding up, but it can buy you time.

Refinance

If you have good credit, refinancing could get you a lower rate or a longer repayment term. That may cut your monthly bill, though you’ll likely pay more interest overall. Always compare offers from multiple lenders.

Negotiate a settlement

After default, some lenders may accept less than the full balance as payment in full. Settlements usually require a lump sum and hurt your credit, so treat this as a last resort.

Get outside help

Nonprofit credit counselors can help you build a budget. If you’re facing a lawsuit or thinking about bankruptcy, talk with a student loan attorney.

FAQs

Can private loans be forgiven in bankruptcy?

Yes — but it’s tough. You’ll have to prove “undue hardship” in court, which is a high bar. Some loans, like bar study loans or amounts borrowed above your school’s cost of attendance, can be easier to discharge. Talk with a bankruptcy attorney if you think this might fit your case.

Do borrower defense or closed school discharges apply to private loans?

No. Those are federal-only programs. Private lenders don’t offer them, even if your school closed or misled you.

Is there an application for private loan forgiveness?

Not really. Other than Navient’s misconduct discharge, there’s no formal application. Most forgiveness happens automatically — through death, disability, or a legal settlement.

What happens if I default on a private loan?

Default usually kicks in after 120–180 days of missed payments. At that point, your lender can demand the full balance, sue you, and hit your credit hard. And unlike federal loans, there’s no rehabilitation program to get out of default.