Almost 54% of college-going students in the US take student loans to finance their education. While many students take loans only from Fedloan, others also consider taking private student loans. Education in the US is becoming costly day by day. Therefore, to meet the expenses while studying in college, students take Federal loans and private loans simultaneously.
The process of taking student loans is quite simple and the students who meet the criteria get the loans they deserve. However, after completion of their college degree, the first thing students worry about is paying back the debt. Mostly they seek assistance from their government. There are programs in the US including the Biden student loan program that aim to cancel students’ debts. At times students succeed in getting their Federal loan debts canceled, but they face problems in getting debt forgiveness from private lenders. In this article, we will look at the various ways one can follow to get their private loan debts canceled and how government programs may help in this regard.
What is a private student loan and who finances them?
Private student loans can be taken from banks, business firms, non-profit organizations, or other private entities. Federal loans come with low-interest rates. On the other hand, these loans have comparatively higher interest rates.
Can a private student debt be canceled? What are the ways and possibilities to get these loans canceled?
In comparison to the Federal loans, it is extremely difficult to get the private student loans canceled unless there are some agreements signed between the borrower and private lender. The agreements include discharging the debt or a promise to provide relief in case of an emergency. However, private lenders are not required by legal proceedings to cancel the debts. Usually, students prefer loans that are accommodating meaning that they offer the borrowers relief in case their guardian dies. In addition to this, the private loan programs also provide forgiveness options in case of a severe drawback in the borrower’s life. For example, the nation’s largest private lender, Sallie Mae, offered a new total and permanent disability (TPD) assistance option. The program enables a borrower to NOT pay any of the debt in case the borrower gets disabled permanently.
In other cases, when a college gets closed permanently due to some reasons, there are programs approved by the US Department of Education to provide assistance to students. In 2020, a college chain in the US known as the Education Corporation of America announced to shut down its campuses permanently. As a result, the students who were studying on the private student loans provided by the campuses were highly affected. Their degrees got stuck and they were puzzled about how they would repay their debts. The majority of the students were from Brightwood College. The college had a loan forgiveness program approved by the US Department of Education. Those who were enrolled in the program got complete student loan cancelation. Therefore, it is important to research the college you are applying to and the relief program its finance department offers.
Can the private student debt be forgiven using the Biden loan forgiveness program?
Private loans are different from federal loans. Those are provided by private entities. Private loans are not guaranteed by the government and, thus, they have no affiliation with the federal loan repayment programs and debt forgiveness initiatives. These completely private loans cannot be governed by government-led departments.
While Biden has the authority through Executive Action to cancel the federally administered loans, he cannot force private entities to cancel the private student loans. But there are always some ways!
Although there has been uncertainty about the private loan being forgiven through the Biden student loan program, there are proposals designed to benefit the students studying on the private student loans. The proposals are:
- The administration passed a bill that under the loan forgiveness program students facing financial hardships would be given the assistance of $10,000 so that they may pay the amount to the private lenders.
- Also, the National Defense Authorization Act would have given up to $10,000 to borrowers as monetary assistance to pay their private lenders.
- In addition to this, Democrats also presented the Medical Bankruptcy Fairness Act of 2021. This bill, with the help of the US Bankruptcy code, allows federal and private student loan borrowers to discharge their loans. However, this is not completely possible right now due to the code’s harsh dealings of private student loans.
- There is another bill known as the Debt Collection Improvement Act, which would allow the borrowers to withdraw from the loan completely if they get disabled totally.
In essence, it is not very easy to cancel student loans; however, there are agreements by the private lenders and the US government bills that allow the private student loan borrowers to get their debts forgiven.
On our website, we provide students with all the information they need to get the loans that suit them. If you are also here to get started with your loan application, we at https://studentloanforgivenessapplication.com/ are ready to help you!