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What’s the Deal With Private Student Loan Forgiveness?

Right now, there are 45 million student loan borrowers in America with a combined total of $1.58 trillion in student loan debt.1,2 To say we have a student loan crisis on our hands would be a huge understatement. Those numbers have fueled a lot of talk about student loan forgiveness, and now every borrower is wondering if their slate will one day be wiped clean.

But what about private student loans? Can those be forgiven? Before you get too invested in the idea of your debt disappearing, you should know that private student loan forgiveness isn’t really a thing. But keep reading to find out how you can get rid your private student loans—without waiting on someone else to do it for you.

What’s the Difference Between Private and Federal Student Loans?

Before we talk about student loan relief, it’s important to know that not all student loans are created equal. Yeah, both private student loans and federal student loans lend money to students to pay for college, but they work very differently. First off, federal student loans are funded by the U.S. Department of Education (aka the government), while private student loans come from a bank, credit union, state loan agency or another financial institution. In fact, there are entire companies dedicated to making private student loans—like Sallie Mae, Earnest and Ascent.

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In order to take out federal student loans (or better yet, to get scholarships and grants that you don’t have to pay back!), you have to fill out the FAFSA (Free Application for Federal Student Aid). Private student loans, on the other hand, are treated more like personal loans. The lender looks at your credit score and history to decide whether or not to loan you money—or if you need a cosigner (which, heads up, is never a good idea). But it usually only takes a college acceptance letter for private companies to lend money to an 18-year-old (and set them up for a lifetime of payments). Because college freshmen are fresh meat to these loan sharks.

Can Private Student Loans Be Forgiven?

Technically? Yes. Realistically? No.

Since private student loans aren’t controlled by the government, borrowers don’t have the same protections they do with federal student loans. So, while private loan lenders may have the power to forgive student loans, they’re certainly not going to let you or your student loans off the hook. At least not by choice.

There have a been a few cases (like the recent Navient settlement) where private student loans were canceled. But it’s extremely rare and usually only affects a small percentage of student loan borrowers under very specific circumstances. And it took more than 35 states suing Navient for them to agree to cancel some of their private student loans. So, if you’re hoping your lender will forgive your student loans out of the goodness of their heart . . . well, let’s just say you’ll be waiting until your grandkids go to college.

Maybe you’ve heard about some of the different types of student loan forgiveness out there, like the Public Service Loan Forgiveness Program or the Teacher Loan Forgiveness Program. But these only apply to federal student loans—not private. And even then, your federal student loans aren’t guaranteed to actually be forgiven. In 2020, only 1.27% of applications for the Public Student Loan Forgiveness Program were approved.3 Yeah, those aren’t great odds. So, while serving your community or teaching in a low-income area are definitely noble things to do, if you’re thinking it will make your student loans disappear, you’re going to be deeply disappointed.

And sorry, but Disability Discharge Forgiveness is also off the table. Legally, private lenders don’t have to forgive student loans if a borrower becomes permanently disabled. They’re not even required to discharge private student loans if the borrower dies. Yeah, that’s downright low of them! But what do you expect from an industry more obsessed with making money than actually helping people?

Will President Biden Forgive Private Student Loans?

President Biden made a lot of promises during his campaign—a big one being that he would forgive student loans. But as of right now, it’s just talk. And it’s still not clear if the president can actually forgive student loans with an executive order. It’s more likely that student loan forgiveness for the masses would literally take an act of Congress. And even if that does happen (the odds don’t look good), it would only affect borrowers with federal student loans.

There has been some legislation around canceling private student loan debt—mostly for borrowers with a lower income or who qualify for financial hardship or disability. But nothing’s been passed yet. And again, it’s not going to be for everyone. Bottom line: Private student loan forgiveness (and student loan forgiveness in general) is not something to bank on.

How to Get Rid of Your Private Student Loans

Listen, we know your student loans may feel super overwhelming. And we want them gone just as much as you do! But putting your hopes in politicians’ promises has never been a good idea. And there are a lot of student loan forgiveness scams out there, preying on desperate people. So, instead of crossing your fingers and waiting for someone else to take care of your student loan debt, what if you took matters into your own hands?

Here are some ways to help you knock out your private student loans:

Follow the Debt Snowball Method

Paying off your student loans may seem impossible right now, but the debt snowball method is a total game changer! It’s the fastest way to pay off your debt—especially if you’ve got multiple private student loans.

Here’s what you do: List out all your debts from smallest to largest (never mind the interest rates right now). You’ll continue to make minimum payments on all your debts, except for the smallest. Throw as much extra money at your smallest debt as you can until it’s gone. Then, take whatever you were paying toward that debt and put it toward the next-smallest debt. Rinse and repeat. The more you pay off, the more money you have to attack your debt—like a snowball rolling downhill. You’ll see real quick that this method gives you more motivation and faster progress!

Use the Student Loan Payoff Calculator

Do you really want to spend the next 20 years paying off your student loans? That’s exactly what lenders want you to do because it means more money for them in interest. But you’d be surprised how much faster you can get out of debt when you bump up your payment—even if it’s just $100 more a month! Plug your numbers into our Student Loan Payoff Calculator to find out how soon you can be debt-free and how much you can save in interest. You’ll be inspired to really ramp up your debt snowball!

Consider Refinancing Your Student Loans

Lenders love to encourage borrowers to apply for deferment or forbearance (aka pausing your payments). But that only benefits the lenders and keeps you trapped in debt. Plus, student loan deferment and forbearance aren’t options for people with private student loan debt.

But if you’re having trouble staying on top of your student loan payments, refinancing might be a good option for you (especially since refinancing rates are the lowest they’ve been in a while).4 Just be sure you’re going with a fixed interest rate (not variable). And don’t be so focused on getting a lower monthly payment that you get stuck with a longer repayment plan or a higher interest rate. Yes, you want to make sure you can afford the monthly payment, but you also want to pay as much as you can toward your debt—so you can knock it out faster!

Watch Financial Peace University

Crushing your student loans takes more than just doing the math. You have to get angry at your debt and be willing to do whatever it takes to get it out of your life! With Financial Peace University, you’ll learn why debt is keeping you from building wealth and the step-by-step plan to help you ditch debt for good. This course will show you how to find more money in your budget, save for your future, and make smarter money decisions in every area of your life.

You can watch Financial Peace University right now for free. And trust us, Lesson 2 will get you fired up and ready to attack your debt like never before! No more relying on the government to fix things. You have the power to get rid of your student loans once and for all.

Guide to Getting Rid of Your Student Loans

Counting on the government to forgive your student loans? Find out the truth about loan forgiveness and how to make progress with this in-depth guide.

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Ramsey Solutions

About the author

Ramsey Solutions

Ramsey Solutions has been committed to helping people regain control of their money, build wealth, grow their leadership skills, and enhance their lives through personal development since 1992. Millions of people have used our financial advice through 22 books (including 12 national bestsellers) published by Ramsey Press, as well as two syndicated radio shows and 10 podcasts, which have over 17 million weekly listeners. Learn More.

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