Private Student Loan Forgiveness Options: How It Works

• Private loan forgiveness is rare and depends on specific circumstances, like disability or predatory lending.

• Federal programs like PSLF and the one-time account adjustment don’t apply to private loans.

• Some lenders offer forgiveness for death or total disability—contact your lender for options.

Private student loan forgiveness doesn’t happen often and is usually only available in special cases, like if you become disabled, someone passes away, or the loan was unfair from the start.

This guide explains:

• Who qualifies for forgiveness

• Why forgiveness is rare among private lenders

• What alternatives like refinancing or settlements are available

• Potential tax implications of forgiven private loans.

Forgiveness for private student loans isn’t guaranteed, but knowing where to start can help. This guide walks you through your options and next steps.

Related: How to Get Rid of Private Student Loans

Yes, but it’s quite rare and typically applies to specific situations that fall outside the scope of federal programs. These cases often involve unique conditions or eligibility requirements.

Here’s what you need to know:

• Limited Forgiveness Options: Some private lenders, like Navient, may forgive loans for borrowers who attended certain for-profit schools with unfair loan practices. These cases are rare and have strict rules. Check out the list of schools that have defrauded students.

• Disability or Death: Many private lenders may forgive loans if the borrower or co-signer dies in the event of total and permanent disability. For more detailed information, read this guide: When a Cosigner On a Private Student Loan Dies.

• Federal Programs Don’t Apply: Private loans, including refinanced federal loans, don’t qualify for federal forgiveness programs like PSLF or other Department of Education programs.

If you’re unsure about your options, contact your lender and ask about potential forgiveness programs or discharge criteria specific to your loan.

Private student loan forgiveness is rare because it’s not how private lenders make money. Unlike federal loans, which are backed by the government and have forgiveness programs built-in, private lenders are businesses that need to profit.

Here’s a simple breakdown:

• Profit Focus: Private lenders are in the business of lending money to make a profit. Forgiving loans means losing money, which goes against their core objective.

• No Legal Obligation: There are no laws requiring private lenders to offer forgiveness programs. They have complete discretion over whether to forgive loans.

• Alternatives are Preferred: When borrowers struggle to repay, private lenders often prefer to offer solutions like deferment, forbearance, or loan modification, which still generate some revenue rather than complete forgiveness.

Related: The Difference Between Forbearance and Deferment

Navient also offers forgiveness for borrowers who attended certain for-profit schools that engaged in misconduct, such as providing misleading information or using aggressive recruitment tactics.

Eligibility is determined on a case-by-case basis, and borrowers must submit a School Misconduct Discharge Application. For more information, contact Navient’s Office of Consumer Advocate at 888-545-4199 or advocate@navient.com.

Related: Navient Student Loan Forgiveness

Private student loans don’t qualify for federal forgiveness programs like PSLF because they’re not federal loans. They’re separate agreements with private lenders like banks, credit unions, or online companies.

Think of it this way: borrowing money from a bank differs from borrowing from a family member. The rules for repayment are different because they’re separate agreements.

Here’s why the federal government can’t forgive private loans:

• Private Agreements: These loans are legal contracts between you and the lender. The government has no control over them unless it purchases the loan or passes a new law to allow forgiveness.

• No Federal Oversight: Federal programs like Public Service Loan Forgiveness are funded by taxpayers and apply only to loans the government owns or backs.

• Refinancing Changes Ownership: If you refinance a federal loan with a private lender, it becomes a private loan and is no longer eligible for federal forgiveness.

In short, the government can’t forgive private loans the same way it forgives federal loans. Federal programs like Public Service Loan Forgiveness are designed for loans the government owns or backs.

Private loans, even those that were once federal, are simply not under the government’s authority.

The Biden administration has forgiven billions in federal student loan debt, but extending similar forgiveness to private loans would require significant legal or financial changes.

Step 1: Contact your lender directly. This is the biggest step. Lenders have the most up-to-date information on their specific policies and any potential forgiveness programs. Be prepared to provide your loan account information.

Step 2: Ask specific questions. Don’t just ask if they offer forgiveness. Inquire about specific situations like:

• Death or disability: What happens to your loan if you or your co-signer dies or becomes disabled?

• School misconduct: Does the lender offer any forgiveness related to borrower defense to repayment or school closure?

• Other circumstances: Are there any other situations where the lender might consider forgiveness?

Step 3: Gather necessary documentation. If your lender indicates potential eligibility for forgiveness, they’ll likely require documentation. This might include:

• Loan agreements

• Payment history

• Disability or death certificates (if applicable)

• Documentation of school misconduct (if applicable)

Step 4: Understand eligibility requirements. Carefully review your lender’s criteria for any forgiveness programs. If you believe you meet the requirements, submit a formal request with supporting documentation.

Yes, there are options if your private student loans aren’t eligible for forgiveness, but they might be limited. Here’s what you can consider:

• Refinance Your Loan: Student loan refinancing can help you get a lower interest rate or more affordable monthly payments, but you’ll still repay the full private student loan balance under new terms. Learn about How to Refinance Your Student Loans.

• Negotiate a Settlement: If you can’t afford the full balance, you might negotiate a reduced payoff with your lender. This usually requires defaulting on the loan first, which can hurt your credit report. Learn about How to Get a Discount for Paying Student Loans in Full.

• File for Bankruptcy: This may be an option if you can’t settle or afford payments. But you must demonstrate undue hardship, which is difficult.

• Do Nothing (But Know the Risks): If you can’t pay, your lender may sue, leading to wage garnishment, liens, and damage to your credit report. Related: Can I Go to Jail For Not Paying a Student Loan?

What’s Not an Option: Income-driven repayment plans are not available for private loans.

Need Help? If you’re facing financial hardship, contact your student loan servicer or seek legal advice to explore repayment assistance programs, settlement, or bankruptcy options.

Related: What Happens If You Can’t Pay Private Student Loans?

Generally, forgiven private student loan debt is considered taxable income. But, the American Rescue Plan Act of 2021 made student loan forgiveness tax-free at the federal level through the end of 2025.

Here’s what you need to know:

• Federal Taxes: You won’t owe federal taxes on any student loan forgiveness received through 2025, whether it’s for federal or private loans.

• State Taxes: Some states may still consider forgiven student loan debt as taxable income. Check your state’s tax laws or consult with a tax professional for specific guidance.

• Beyond 2025: Unless extended, the tax-free status of forgiven student loans will likely expire after December 31, 2025.

Consult a tax professional or your loan servicer to understand the potential tax implications of your forgiven private loans.

Related: Student Loan Forgiveness 1099-C

Most private student loans will never be forgiven. But that doesn’t mean you’re stuck.

Private lenders aren’t required to forgive loans, so it’s easy to feel stuck. But when you know where to look, there are ways to make things better. Refinancing can lower your payments, settlements might reduce what you owe, and bankruptcy could give you a fresh start in extreme cases.

Schedule a consultation today with our student loan lawyers to create a plan that works for you.

Related reading:

• Navient Now Offers Private Loan Forgiveness – Are You Eligible?

• Can Private Student Loans Be Discharged In Bankruptcy?

• Private Student Loan Default – Consequences and Recovery

• Can Refinanced Student Loans Be Forgiven?