- If you're hanging out on this channel,
you probably don't need to be reminded
that student debt is a huge problem in the United States,
especially private student loan debt.
While most of the debt is held by the federal government,
a substantial portion of it is held by private banks
and other private lenders,
like the student loan refinance, or SoFi and Earnest.
Statistics are always changing,
it's estimated there is about $100 billion
in outstanding private student loan debt.
And while some borrowers
take out only a few thousand dollars in private loans
to cover any expenses federal loans won't cover,
others end up with a heavy private debt burden
ranging from $20,000 to $200,000.
Federal student loans are hard to get forgiven,
but at least some programs for loan forgiveness,
like the Public Service Loan Forgiveness Program, do exist
even if it's hard to qualify for them.
For borrowers with private student loans, though,
it's somewhere between difficult and impossible
to get those loans forgiven.
In this video, we'll share what you need to know
about private student loan forgiveness.
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Okay, why is it so hard
to get private student loans forgiven?
It's because private lenders
don't really have any incentive to forgive them, basically.
And private lenders also have a lot of recourse
to collect on your loans if you don't pay.
The federal government does want its loans repaid,
but it's also a little more responsive
to pressure from constituent,
and it does want people
to go into public service and teaching.
Hence, the loan forgiveness programs
directed at those borrowers.
Private lenders don't really care
what you do with your education
as long as they get paid back.
And since private lenders know borrowers
likely won't be able to get their loans
discharged in bankruptcy,
which would be another kind of forgiveness,
they don't have any reason to offer any kind of forgiveness
or even a modification.
That doesn't mean they won't work with you at all,
but it does mean they're most likely not gonna erase
any of the debt as part of that plan.
You might be asking,
"Is there any way to have private student loans forgiven?"
The short answer is yes, but don't get your hopes up,
unless you're in a specific circumstance
which most are pretty unpleasant.
Number one, death. Specifically, the borrower's death.
This is pretty rough to think about
but many private loans do have terms written
so that the debt will be forgiven upon providing proof
of the primary borrower's death.
If you're a co-signer on a loan
and the primary borrower dies,
you'll need to consult the terms of the loan
to see if this applies to you.
You'll probably have to speak to the lender
and provide a copy of the borrower's death certificate, oof,
perhaps along with some other paperwork.
For example, SoFi is a private lender
that does release the co-signer
in the event of a borrower's death.
However, many other private student loan lenders do not.
That's one of the big reasons why most borrowers
with private student loans
should take out a life insurance policy,
especially if there is a co-signer you need to protect.
Number two, permanent disability.
A few private lenders offer forgiveness
if the primary borrower
becomes completely and permanently disabled.
More lenders offer forgiveness for death
than for disability.
If your lender doesn't offer forgiveness for disability,
your co-signer may still be on the hook
for paying back the debt.
Check the terms of your loan and call your lender and ask.
Other than Sallie Mae, Wells Fargo, Discover,
and the New York State Higher Education
Services Corporation,
most private lenders do not offer this option,
but they're big lenders,
so your private loans may well be with one of them.
It's always good to check anyway.
Number three, if you got scammed, maybe.
It is illegal for a school to, for example,
promise a certain salary on graduation
or a certain type of job or make other false claims
that encourage you to take out loans
you otherwise would not have taken out.
During the Obama administration,
the Consumer Financial Protection Bureau
and the United States Department of Education
took a variety of legal actions against four profit colleges
that made these kinds of illegal promises.
Corinthian Colleges Campuses were forced to close in 2015
after being crippled by fines
for making false promises for years.
They're one of the best known college scams,
but there are others.
If you took out federal loans
to attend a Corinthian College's school
like Everest College, Heald College, or Wyotech,
you are probably eligible for a loan discharge.
Although it's easier to get these federal loans discharged,
you may also be able to get your private debt
discharged as well.
For example, Corinthian Colleges gave out
hundreds of millions of dollars in private Genesis loans.
If you have one of those,
you may well be eligible to have it forgiven
under a recent settlement
with the Consumer Financial Protection Bureau.
If so, you should have received a letter
detailing your eligibility,
and many have already received forgiveness.
If you think you're eligible but didn't receive a letter,
try contacting your loan servicer and asking
or call the CFPB and file a complaint.
Another well publicized settlement is with DeVry University.
The FTC sued DeVry University
for a variety of deceptive practices,
including a misleading claim that 90% of their graduates
found employment in their field
within six months of graduation,
and another, that DeVry University graduates
would earn 15% more than graduates from other colleges.
In 2017, they reached a settlement
that included DeVry University agreeing to discharge
private student debt that it had issued
between September 2008 and September 2015.
However, this doesn't include loans from private banks
that you took out to attend DeVry University.
Basically, if you attended a school
that made fraudulent claims,
there may be an avenue for discharge.
But it's best to speak with a lawyer about your situation
to see if there's a chance of moving forward.
Recently, Navient settled a lawsuit
involving private loans issued to borrowers
who went to a private college,
forgiving about $4 billion in student loan debt.
It can happen, but it's not easy.
Number four, if your lender can't prove
they actually own the loan.
Again, maybe.
As you may have heard,
a lot of debt taken a out before the financial crisis
and the Great Recession was sold around
to other lenders with really shotty paperwork processes.
The National Collegiate Student Loan Trusts,
a group of companies in Delaware,
holds a lot of this old debt
and has been known to sue borrowers to collect the debt.
In the process, it has been seen in some cases
that they may not have been able to prove
they really owe the debt due to missing paperwork,
which means it's not collectable.
What are some other options that you might have?
You probably have two main options
for private student loans that can't be forgiven.
Number one, forbearance.
This is a temporary status
that allows you to put off paying back your loan
for an unspecified amount of time.
Usually up to 12 months.
Typically, you have to show that you have financial hardship
or that you have lost a job recently.
And interest will keep accruing
while you're in forbearance as well.
So it's not great.
But it will give you time to get yourself together
and prevent you from going further into default.
Number two, refinancing.
If you have enough income to make payments
but you're struggling
under the weight of the payments you've got,
you might be a good candidate for refinancing your loans.
Private student loans often carry very high interest rates.
And if you could reduce a 9% or 12% interest rate
to a 3% or 4% interest rate,
you could make your payments far more manageable.
You might also be able to stretch out your term of repayment
from 10 to 20 years or some other number,
which might make it more plausible
that you can afford regular payments.
You can use Credible to compare the top lenders in minutes.
Plus, College Investor viewers and readers
can get up to $1,000 bonus if you refinance.
We'll put a link in the description.
Number three, bankruptcy.
Bankruptcy is another option,
but it's not an easy path either.
There's a myth that student loan borrowers
cannot get their student loans discharged in bankruptcy,
but that's not true.
Bankruptcy is an option,
but you have to be strict criteria,
specifically the Brunner Test.
This states that you must have an undue hardship
from your loans, which is very vague.
However, recent court cases
have been trying to make it easier for borrowers
by defining what this means and providing examples
of what judges and courts are allowing.
As such, if you're facing a huge burden
from your private loans,
it could make sense to speak to a lawyer
who understands these options
and can see if this is an option for you.
In the end, private student loan debt
is really hard to get out of.
You have fewer legal protections
than federal student borrowers do,
and procedures for appealing
and fighting back against your lender that is less clear.
But if you've attended the four profit institutions
represented by Corinthian Colleges and DeVry University,
you may have some other avenues for relief.
However, when it comes to getting help
with your private loans,
make sure you don't fall for student loan scams.
There are a lot of people
that prey on student loan borrowers
who are struggling financially.
If your problem is that you've got a legit degree
but your income just isn't up to meeting the loan burden,
you'll probably have to pursue other options
like forbearance or refinancing
instead of hoping for forgiveness.
It's bad news,
but unless the law changes on bankruptcy discharge,
it's the truth.
You can also look at side hustling
to boost your income during this time as well.
We have a great video on this channel
with the best side hustles
that allow you to earn a decent income on your terms.
So, what do you think?
Are you struggling with your private student loans?
Please let us know in the comments below.
This is Andy from The College Investor,
and we'll see you in the next video.
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