What to Do When There Are No Private Student Loan Forgiveness Options? 5 Alternatives

Private student loan forgiveness is rare. Some lenders offer it in extreme cases, but it’s generally only available with federal loans. What can you do if you’re struggling to make ends meet and you don’t qualify for a loan forgiveness program? This article provides five practical steps you can take to improve your financial situation.

You were accepted into college. Excited to pursue a degree in your chosen field but unable to afford it out-of-pocket, you sought out loans to cover the costs. You were approved and successfully earned your degree. While feeling a sense of accomplishment, the impending reality of repaying all of your loans is knocking at your door.

You see the amount on your paychecks and realize the loan repayments are going to be stifling. You may be forced to hold off on buying a home, feel strained to pay your bills and fall behind on saving for retirement.

Sound familiar? This situation is all too common in America. The current amount of student loan debt in the U.S. is between $1.3 and $1.4 trillion, according to the Federal Reserve Bank of New York’s Quarterly Report on Household Debt and Credit. It’s a mix of federal and private loans, which works out to an average of about $28,000 per student.

What can you do to manage your loan repayments, particularly if loan forgiveness isn’t an option?

Let’s take a closer look at the available loan forgiveness programs and five alternative options to help students afford private loans.

What is the student loan forgiveness program?

If any of your student loans are federal loans, consider the following loan forgiveness options. Stanley Tate is the owner of Tate Law, a law firm that specializes in fighting on behalf of clients with student loan obligations.

He says, “The two most popular [loan forgiveness programs] are the Public Service Loan Forgiveness Program [aka Obama student loan forgiveness] and income-driven repayment plan forgiveness.”

He explains, “The PSLF program will forgive the balance on certain federal student loans (Direct Loans) tax-free if:

  • You work full-time for the government or 501(c)(3) or other qualified nonprofit
  • You repay under an income-driven repayment plan (REPAYE, PAYE, IBR, or ICR)
  • You make 120 monthly payments under one of those plans.

The income-driven repayment plan will forgive your federal loan balance after you’ve made 240 to 300 months of payments under one of the plans. Whether you need to make 240 or 300 months of payments depends on your loans and the repayment plan you choose.”

Read more about the different income-driven repayment plan options.

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Can you get private student loans forgiven?

The programs available for federal loans can be very helpful, but can private loans be forgiven? “No. That’s the general rule,” says Tate. He adds, “Private student loans don’t have the same forgiveness options as federal student loans. That said, I have had some private lenders willing to write off loans for borrowers who suffer from a crippling disability that prevents them from working. This does not happen often.”

Can a Sallie Mae student loan be forgiven? Often, there’s confusion about whether Sallie Mae loans are considered Federal or private.

Ross A. Riskin, CPA/PFS and founder of the American Institute of Certified College Financial Consultants says, “We need to be careful with the wording here. Currently, a private student loan issued and serviced by Salle Mae cannot be forgiven, but a federal student loan issued by the Federal Government and serviced by Sallie Mae can be. We always have to make sure we are clear on who the issuer of the loan is and who the servicer of the loan is.”

So, in summary, loan forgiveness is not an option for private loans.

What else can you do? Here are 5 options

1. Contact your lenders

Do some homework to figure out all the info on your current loans. Identify who the lenders are, their contact information, your repayment periods, and your interest rates. Then, contact each lender and let them know you are having trouble keeping up with the payments.

Try to negotiate a better deal that can help to lower your payments and total cost. Be sure that any offers you consider will actually help both in the short and long-term, as you don’t want to get a new deal that will leave you worse off.

2. Refinance your loans

Can you refinance private student loans? “Yes, you can, and can often do so to lower your current loan interest rate without incurring loan origination fees,” says Riskin.

Lendkey, for example, claims to save its borrowers an average of $10,000 on their student loans, while Commonbond claims an average savings of $24,046 per borrower.

When shopping for lenders, you will find a variety of eligibility requirements such as:

  • Minimum credit score
  • Eligible loan types
  • Eligible degrees (Undergrad and/or Graduate)
  • Minimum income
  • Minimum student loan debt
  • Employment

Additionally, lenders differ in their interest rates, repayment periods, and fees. Tate says, “If a borrower is looking to refinance a private student loan, they should shop around for the best rate.”

Also, look for the best fit for your unique situation. If one lender turns you down, don’t get discouraged, because others often have different eligibility criteria.

Review and compare top lenders on SuperMoney’s Student Loan Review Page. When you’ve narrowed down the best options for your situation, you can apply quickly without hurting your credit score. This way, you can find out how much you will save if you switch.

3. Take out a home equity loan

If you own your home, you can borrow against your equity by using a home equity line of credit, cash out refinance, or home equity loan. This is a viable option if you have enough equity to cover your student loans and if you can lower the cost of borrowing.

The pros are that you can consolidate all of your loans into one payment and may get a lower interest rate. The cons are that you are putting your home at risk and you may have to pay closing costs and loan fees.

Many students struggling with student loans don’t yet own a home. If you do, however, you might want to consider this option. To shop lenders, check out our Mortgage Refinance Reviews Page.

4. Look for employer-paid student loan assistance

This is a new benefit being offered by some employers which helps employees pay off their student debt.

For example, according to Forbes, Fidelity employees at the manager level or below are eligible to receive up to $2,000 per year towards their loans (up to $10,000 total). Staples is another early adopter of this benefit, offering full-time associates $1,200 per year and up to $3,600 total.

These benefits are just making their way onto the workplace scene, so they’re far from the norm. However, if you choose a company with this benefit, it can help to chip away at the larger debt block.

5. Increase your income

Another option is to work on increasing your income. A good first step is to talk to your current boss about how you can work toward a promotion. Find out what the next step is on your career path and ask what you need to do to get there. If that’s going to take awhile, you can also look into developing an additional income stream, such as picking up freelance or contract work.

There are many online work platforms that offer a wide range of jobs on a project-by-project basis such as Upwork, Freelancer, and Guru. One easy way for college graduates to get started is to write papers and perform research, similar to what was expected in school. If you also have other skills such as graphic design, translating, transcribing, coding, consulting, etc., you will find plenty of opportunities.

Develop a plan to pay off private loans

While there are no private loan forgiveness options as of yet, there are steps you can take if you are struggling. A good place to start is by contacting your existing lenders. Find out what they will offer you. Once you know, shop around for student loan companies.

Find out what kind of offers they will give you if you refinance or consolidate your debt. Lastly, if you have a home and are considering borrowing against your equity, shop around with those lenders to see what you can get.

Once you have all the quotes, compare them to see which route will be the best for your situation. Remember to look at more than just the monthly payments. Factor in all the fees and the total cost of the loan over the term. When you have lowered your loan payments as much as possible, consider ways you can increase your income. Lastly, keep your eyes out for companies offering student loan repayment benefits.

Unfortunately, there’s no easy way out of private loans, but you can make your situation more manageable by trying these five options.

Start now by finding out what lenders can offer you.

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Fixed:as low as 3.25%*

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Variable: 2.56% – 6.73%*

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