In 2017, I’m more optimistic than ever before that Private Student Loan Forgiveness opportunities are about to explode, and in a major way.
Why? Because on January 18, 2017, the Federal Government’s Consumer Financial Protection Bureau (CFPB) filed three massive lawsuits against Navient, the country’s largest student loan servicer, and this lawsuit represents the biggest crack in the private student loans dam that I’ve ever seen.
In fact, I have a very strong suspicion that the biggest, best, and most comprehensive forgiveness program we’ve ever seen is about to be unveiled, and while it doesn’t exist yet, I’ve written up a page of content covering what I think we’ll get, and called it the Navient Student Loan Forgiveness Program.
What else makes me optimistic? Because Navient is being accused of some seriously illegal (not to mention immoral) activity, including:
- Failing to apply or allocate borrowers payments correctly to their accounts
- Obscuring information that consumers needed to maintain lower monthly payments
- Coaxing borrowers to pay more than they had to on their loans
- Hurting the credit of disabled borrowers, including veterans who’ve been severely injured
- Lying to private student loan borrowers about requirements for releasing co-signers on their loans
And when a massive company does all sorts of illegal (and immoral) stuff, the result is typically some kind of financial assistance for anyone who ever had any business dealings with them.
In fact, I have a feeling that President Trump’s Student Loan Plans will even include the first Federally-mandated changes to Private Student Loan Forgiveness Laws, because I think he will use this issue for political purposes.
But Before We Get Into That…
Before you spend hours researching this topic, the first decision you need to make is whether you’re going to handle everything yourself, or outsource it to an expert (who will charge you for their service).
If you’re smart, good at understanding complicated legal topics, capable of writing up detailed explanations of technical processes, good at negotiating settlements and great at arguing effectively, then you should take care of everything yourself (because it’ll save you money).
However, if you’re not described by the paragraph above, or if you’ve got extra money, don’t want to spend a ton of time on this, and want to ensure the best chance for getting rid of your debt, then it may be worth investing a few hundred to a couple thousand dollars bringing in a hired gun to handle everything all of the research, paperwork and negotiations processes for you.
And while there are lots of companies that operate in this space (debt consolidation, refinancing and negotiation is a dirty, dirty arena), there is only one company who I trust, and who I’d feel comfortable referring my readers to.
The Student Loan Relief Helpline can tell you in 5 minutes whether or not you’ve got a realistic chance of getting rid of your debt. The initial phone call and consultation are free, so if you’re feeling lost or overwhelmed, then I advise you call them to get some advice.
You can reach the Private Student Loan Relief Helpline by calling 1-866-530-9946.
The Navient Lawsuit & Private Student Loan Forgiveness
The CFPB’s lawsuit against Navient is relevant because Navient services more private student loan debt than anyone else on the planet, and now that they’ve been accused of these illegal activities, they’re going to have to end up settling in or out of court with the FTC.
When settlement’s happen, things change, and part of the expected settlement between Navient and the CFPB is probably going to include financial assistance to everyone who’s got a student loan with the company (whether they’re Federal, or Private).
My opinion is that the financial assistance that emerges from this lawsuit’s settlement will include a significant amount of Private Student Loan Forgiveness, as well as other monetary benefits, like reparations (refunds for money already paid back to them), debt forgiveness (write-downs for outstanding debt), and additional leniency on repayments (via lowered interest rates, longer repayment terms, new deferments or forbearance programs, etc.).
So while there’s technically nothing YET to come from the lawsuit, it’s a huge signal of things to come, and it’s by far the biggest opportunity I’ve seen for dealing with excessive Private Student Loan Debt in the past 10 years of tracking the industry.
What Private Loan Forgiveness Options Exist Today?
In 2017, there’s no magic bullet to dealing with private student loans, but until the CFPB lawsuit is settled and we find out what sorts of benefits will be offered to Navient’s borrowers, you do have other options that are entirely worth exploring.
If you’re having trouble making your monthly private student loan payments and you need financial assistance immediately, then you need to start looking at the following 8 opportunities for reducing or getting rid of your debt:
- Private Loan Forgiveness Programs
- Borrowers Defense Against Repayment
- Closed School Discharges
- School-Specific Forgiveness Programs
- Loan Consolidation Programs
- Loan Modification Programs
- Filing for Bankruptcy
- Choosing To Default
Each of these options offers significant financial assistance, with the first four being true “forgiveness” programs, and the final 3 offering not forgiveness, but significant financial assistance.
You’ll need to read through this page’s content to figure out which program applies best to your specific educational and financial situation, then determine how best to proceed.
1. Private Student Loan Forgiveness Programs
Unfortunately, at the time of this writing there are no forgiveness programs available to all private loan borrowers. Unlike the federal student loans industry, private loans are not heavily regulated, and private debt collection is still essentially like the Wild West.
However, depending on where you went to school, and who services your loans, you might have access to some valuable forgiveness programs, but these are only available to a select group of individuals who attended certain schools at certain times, or who are having their loans serviced by certain lenders (like Navient…).
If you’re one of the lucky people who went to a school associated with Corinthian Colleges (Heald, Everest, Wyotech), ITT Tech, or DeVry, then you may be in luck, and you be able to get all of your debt resolved.
For details on dealing with loans from these schools, please see the following pages of my site:
- Corinthian Colleges (Heald, Everest & Wyotech) Private Student Loan Forgiveness
- ITT Tech Student Loan Forgiveness
- DeVry Student Loan Forgiveness
If you do manage to qualify for one of the benefits programs above, then you’re in the small, select bunch of people who have hit the jackpot, because these are truly some of the best student loan forgiveness programs available anywhere.
Other Forgiveness Opportunities
If you attended any other school, then the path to forgiveness is much more complicated, and will require significantly more work.
There won’t be an individual forgiveness program for your particular school, but if you read through the rest of the content on this page, take notes on any elements that might apply to your specific situation, then determine how best to proceed.
Remember that you can also call whoever services your loans at any time to ask them about forgiveness opportunities, and that they are legally obligated to tell you the truth about available programs, but also keep in mind that even Navient, the largest student loan servicer, is right now being sued for lying to their customers about this very topic.
Again, if you’re in a hurry, or if you have trouble understanding complex legal topics, the best way forward will probably be hiring an expert to take care of this stuff for you. And again, if you do choose to go that route, I would recommend calling the Private Student Loan Relief Helpline at 1-866-530-9946.
2. Borrowers Defense Against Repayment
Another excellent option for wiping out your private student loan debt is to challenge the validity of your loans through a program called Borrower’s Defense Against Repayment, which is a complicated legal process, but one that’s 100% worth looking into, because success means getting your loans entirely forgiven.
What’s it mean to look at the “validity” of your loan? It means that you need to spend some serious time thinking about the promises your school made that encouraged you to take the loans out in the first place, look at the way your loans were structured, look to see if the school or your lender promised something that they haven’t delivered on, and evaluate whether the school or lender has violated any relevant Federal, State, or local laws or statutes.
Again, this is a complicated legal process, but if you’re willing to spend some significant time researching these topics, you can take care of it yourself, entirely for free. If you’re in a hurry, don’t understand legal language, don’t have time to do it, or have a little bit of money, then your best bet is to pay an expert to handle it for you, as that’ll dramatically increase the odds that your Borrower’s Defense Against Repayment application gets approved, and your loans get forgiven.
The way this process works is that after you’ve found some kind of violation or issue with the validity of your loans, you’ll write a letter to the Department of Education explaining the problem to them, and if they agree with your claims, then your private loans are completely wiped out.
What Kinds of Things Make a Private Student Loan Invalid?
There are four major ways to prove that your private student loan debt should be considered “invalid”, and thus forgiven:
- If you’re been making payments on your private debt for years, but the balance isn’t going down
- If you’ve been taken advantage of in some way by either the school you attended, your lender, or your loan servicer
- If you attended a school that made claims about the value of your education program that cannot be proven (for-profit schools like Corinthian Colleges, ITT Tech, and DeVry have been slammed on this one)
- If your school or lender included misleading claims or statements in their marketing messages (basically, false advertising)
Again, this is a relatively straightforward process that you can complete entirely by yourself. People with a background in research, law/legal topics, and writing can probably do it all on their own, but for those of you who don’t want to risk getting your application denied, I would suggest hiring an expert to help.
For more information on attacking your private loans via Borrower Defense to Repayment, please visit my page about the Borrower’s Defense Against Repayment Provision.
What Options Do I Have Other Than Defense to Repayment?
There are 850,000 privately funded student loans in America, totaling about $140,000,000,000 dollars ($140 Billion) in debt, and while many of them will qualify for Borrowers Defense Against Repayment, there are far more that simply won’t.
On the bright side, Borrowers Defense Against Repayment isn’t your only option, and in 2017, you’ve got several different ways to either get out of, or at least reduce, your private student loan debt.
The rest of the content on this page goes through each individual opportunity in detail, and most of these sections contain links to additional pages of my site that cover the program in additional detail.
Read on to see what you may qualify for, and how to take advantage of each opportunity.
3. The Closed School Private Loan Discharge Program
The Closed School Loan Discharge Program is an excellent option for anyone who was attending a school that shut down before they were able to complete their degree.
This program is an absolute-guarantee for those borrowers with Federal loans, and a “maybe” shot at getting a discharge if you’ve got Private loans.
To get approval for a Closed School Loan Discharge, you have to be able to prove that you were attending the school (actively enrolled as a student, taking courses, or on some sort of break, but still pursuing your higher education credentials) at the time that the school shut down.
It’s not that difficult a process, however, as all it requires is getting transcripts from the school you attended, and submitting those to whoever services your loans.
And it’s a huge opportunity for anyone that is really stuck in the situation of having invested time and money toward a degree program or other credential that literally could not be completed since the school shut down smack-dab in the middle of your work.
For a comprehensive review of this program works, please visit my page about Closed School Student Loan Discharges.
4. School-Specific Private Loan Forgiveness Programs
As I mentioned above, there are excellent private student loan forgiveness programs available to students who attended specific schools; typically, large, for-profit schools who have been proven to have done some sort of false advertising, making misleading claims about the value of their educational programs, promising students that they’d earn some certain amount of money after graduating, or doing some other thing that violated Federal or State laws.
The three biggest school-specific private student loan forgiveness programs on offer were created for students who attended a Corinthian Colleges School (Heald, Everest and Wyotech), ITT Tech, or DeVry.
But even though these programs are set to provide hundreds of millions of dollars in loan forgiveness benefits to their students, all three programs also have specific eligibility requirements that must be met to qualify for the forgiveness benefits, like having attended the school during a specific time period, being able to prove that the school lied to you or violated some specific state or federal law, etc. Unfortunately, just because you attended one of these schools doesn’t mean that you’ll qualify for any of their forgiveness assistance.
For specific details on how these school-specific programs work, please click the links to their pages on my site, and read through my detailed explanations of each school’s forgiveness package.
The Corinthian Colleges Student Forgiveness Program
The Corinthian College Student Loan Forgiveness Program was created for anyone who attended a CCI-affiliated school, which were all shut down when the company decided to close its doors across the country on most campuses in April, 2015.
As you can imagine, shutting down one of the largest higher education networks in America did not go unnoticed, and many thousands of active students still working toward completing their degrees were left in the dust as CCI abandoned ship and left them without a choice.
Fortunately, the Federal Government stepped in and forced Corinthian to offer financial assistance to any students caught in the crossfire, and this program was designed to allocate $3.6 BILLION (with a “B”) in relief and forgiveness benefits to those individuals impacted by CCI’s nationwide closure.
For details on how to qualify for and receive benefits under this program, please visit my page about the Corinthian Colleges Student Loan Forgiveness Program.
The ITT Tech Student Loan Forgiveness Program
The ITT Tech Student Loan Forgiveness Program was the second major forgiveness program introduced to cover students left in the breeze when another gigantic, nationwide for-profit education system shut its doors unexpectedly, leaving tens of thousands of people with a ton of debt, and no chance of finishing their degree.
People who qualify for the forgiveness benefit are eligible to have up to 100% of their outstanding loans forgiven, but eligibility conditions require that you were an active student enrolled at an ITT Tech program within 120 days of the date that your school shut down.
To find out how this program works, and see if you’re eligible to apply for private loan forgiveness, please visit my page about the ITT Tech Student Loan Forgiveness Program.
The DeVry Student Loan Forgiveness Program
The DeVry Student Loan Forgiveness Program is significantly smaller than that offered by ITT Tech, but it’s still offering $100,000,000 in student loan relief, with option for both Federal and Private borrowers to receive financial assistance.
To qualify for the benefit, you must have attended DeVry between 2008 and 2015, the period of time the Department of Education has proven the school misled students about graduates’s job prospects, salaries, etc., and you will need to fill out some paperwork to prove your student status, outstanding loan debt, etc.
If you attended DeVry during the covered period, then you should have received a letter from the school notifying you of your eligibility for the benefit.
And to get the details on exactly how this program works, please visit my page about the DeVry Student Loan Forgiveness Program.
What if I Went Somewhere Else?
If you did not attend one of the schools mentioned above (a Corinthian property, ITT Tech or DeVry), then you probably won’t have access to a school-specific private forgiveness benefits package, but that doesn’t mean you should give up the hunt for finding effective debt relief.
While there are a handful of opportunities to receive public loan forgiveness via one of the amazing Federal Student Loan Forgiveness Programs that allow debt to be completely wiped out, there aren’t any widely available “forgiveness” programs for people who hold private student loan debt (again, unless you attended one of the schools hit by penalties from the Department of Education, the Consumer Financial Protection Bureau, the Federal Trade Commission, or some other entity like a Class Action Lawsuit).
Fortunately, even though debt forgiveness itself may not be widely available, there are a variety of other ways that you can get effective debt relief for your private student loans, some of which could save you tens of thousands of dollars in the long run, and hundreds to thousands of dollars per month.
Here’s an analysis of the existing debt relief programs for private student loans.
5. Private Student Loan Consolidation Programs
If you need Private Student Loan Debt Relief, then a loan consolidation program might just be your best bet.
Loan consolidation programs have been around a long time, and even before the rise of student loan debt, they were extremely popular for people having trouble paying off credit card debt, mortgages and loans of other types.
The way that student loan debt consolidation works is that you take multiple student loans and combine them into a single loan from a single lender, often resulting in a lower interest rate, more simplified payment scheme, longer loan repayment term and lower monthly payments.
Loan consolidation is similar to loan refinancing, but always involves taking multiple loans and turning them into a single, larger loan.
Don’t Mix Private Loans With Public Loans!
Unfortunately, Private Student Loan Consolidation Programs aren’t compatible with public student loans, because combining public with private debt destroys your eligibility to qualify for the many amazing Federal Student Loan Relief Benefits packages.
So, unless you’ve got multiple private loans you will not want to look further into any sort of private loan consolidation opportunity, but should instead be researching other options.
Things to consider would be loan refinancing or loan modification programs, which are typically available for those people having trouble making their monthly payments.
Again, if you do choose to go this route, I would highly recommend working with the people at the Private Student Loan Forgiveness Helpline, who are experts at handling private loans, and who can help you figure out which company to consolidate or refinance with.
You can reach the Private Student Loan Forgiveness Helpline by calling 1-866-530-9946.
As I mentioned earlier, there is a cost associated with using their service, but the phone call is free, and you will be able to ask a few questions of without having to spend any money, so it’s definitely worth calling before you write it off as being “too expensive”. You may be able to get some extremely valuable information entirely for free!
5. Private Student Loan Modification Programs
Modifying your student loan is another great way to reduce your financial liabilities, reduce monthly payments and take some of the sting out of your outsanding private student loan debt.
The problem with getting a loan modification is that it has to come from your lender, meaning that you’ll have to convince them that it’s in their best interest to cut you some slack.
While there aren’t any official private student loan forgiveness programs, you may be able to get a bit of loan forgiveness if you’re having serious trouble coming up with the money for your monthly payments.
To find out what’s available, you’ll need to contact your lender, let them know that you’re going to be unable to make future payments, and negotiate for a better deal.
This isn’t necessarily an easy process, but it can be extremely lucrative. Hundreds of thousands of people who’ve faced the same financial problems that you do have gone this route and been able to get parts of their student loan debt written off entirely, had their loan terms extended to reduce their monthly payments and/or gotten interest rate decreases to reduce their total liability.
6. Private Student Loan Bankruptcy Discharges
You don’t want to do this unless you have to, because filing for bankruptcy brings about all sorts of other financial problems, but most of all because it’s no longer guaranteed to erase student loan debt entirely.
In fact, it’s pretty hard to get rid of student loan debt by filing for bankruptcy, because it requires proving to a court that your loans are placing an undue hardship on you. How do you go about doing that?
It is possible to get real loan forgiveness from a Private Student Loan Bankruptcy, but you’ll have to prove that your student loan debt places an “undue hardship” on your life, basically meaning that it’s interfering with your quality of life and ability to provide basic needs for yourself and your family (food, shelter, clothing, etc.).
If you can prove that your private student loans are basically driving you into crushing poverty, then it’s possible that you’ll be able to get them discharged, but it’s honestly not that easy, especially as courts have become wary of people running up huge loan debts that they didn’t really need to take out while planning to get rid of them via bankruptcy all along.
7. Private Student Loan Defaults
Believe me, you don’t want to go this route, and for a variety of reasons.
Private student loans are similar to other forms of unsecured debt, like credit card debt, medical debt and any other loan that doesn’t include collateral, but they differ in one important way: defaulting on them opens you up to an array of legal liabilities.
If you Default on Private Student Loan Debt, your lender has what’s called “a cause of action” against you for breach of contract. That means they can sue you for failing to pay back your student loan, and if they win a judgment against you in court, they’ll be able to garnish your wages, have a levy placed on your financial accounts or even get a lien attached to your property. You do not want this.
Defaulting on your loan is not a realistic way to get private student loan help. In fact, in all but the absolute worst situations, default typically ends up causing major problems for your total financial health.
Long before you consider defaulting, be sure to look into the other options for getting help with your private student loans. Try a loan consolidation or loan modification program, or even consider filing for bankruptcy, because default is not going to go down easy.
Hope For the Future
Fortunately, it does look like some help is on the way for those who need help with private student loan debt, as a variety of organizations have been created specifically to provide assistance, or advocate for providing assistance, to those with privates student loans.
Additionally, Congress has been presented with quite a few bills seeking to change laws and regulations in order to provide more effective debt relief to those with private student loans, some of which would provide incredible new opportunities.
Here are some of the organizations, proposals and bills created to present opportunities to those in need of relief from private student loan debt:
Choosing The Best Path Forward
How should you decide whether to handle these complicated processes yourself, or to pay an expert to take care of them for you?
It’s not an easy question, but here’s a quick breakdown on the options of going it alone, vs. paying a service to represent you.
Option 1: Going it Alone
The first option is to do all the research yourself, determine what’s available, then start filling out applications and literally applying for whatever benefits you can find.
This is often a slow, laborious, and frustrating process which many people would rather avoid, and it’s the reason that the private student loan debt consulting industry has skyrocketed in growth over the last several years.
If you do choose to go this route, my website will be an invaluable tool for you to research available benefits and assistance programs, so make sure that you continue to read through this page and check out the other pages in the Private Relief section of the site.
If you have questions about what’s possible, please feel free to ask away in the comments section below and I’ll do my best to get you a response within a day or two.
Option 2: Using a Hired Gun
The second option is to enlist the assistance of a professional student loan relief expert, typically from one of the many available commercial companies now servicing borrowers, and to have them do the research and paperwork on your behalf.
This option can save a ton of time and frustration, but it also comes with an associated cost (typically several hundred dollars for completing research, processing paperwork, and determining exactly what will work best for you).
I like this option for those people who aren’t severely pinched when it comes to money, or for those who don’t have the time or inclination to perform all the required research to determine what benefits and strategy will work best for them.
If you do choose to go this route, I suggest calling the Private Student Loan Relief Helpline, which is an organization of experts focused on assisting people with private student loan debt, and who can help you figure out the best way to get out of debt quickly and easily.
This service does cost money, but it focuses on attacking the validity of your debt, literally challenging the debt collectors to prove that they have the right to demand payment from you.
Does this always work? Absolutely not, but if you call them and discuss your potential case, you should be able to get a pretty good feel or whether or not you’ve got a real chance to have your debt relief application approved.
You can reach the Private Student Loan Relief Helpline by calling them at 1-866-530-9946.
If you do choose to complete the research on your own, please don’t expect to finish everything in an hour or two! You’re going to need to read, read, read, ask questions, and figure out what’s available, and what will work best for you.
Read through the content on my site, ask questions in the comments section below, and remain diligent and dedicated to determining what’s going to work. I promise that you CAN figure it out on your own, it just won’t be as easy or as quick as enlisting the help of an expert.
Recent History of Private Student Loan Forgiveness Changes
There’s been a lot of noise in this space for several years, but only recently has anything actually been done to make private student loans a little easier to deal with.
President Obama was the first President to tackle the issue head-on, but he only made so much progress, and now the reigns have been passed to Donald Trump, who will need to step up to the plate and deliver with some serious changes if we’re ever to climb our way out of the private student loan debt hole.
You can rest assured that I’ll keep tracking changes and reporting developments to the industry, and alerting you all to the best opportunities immediately as they emerge, so be sure to check back often for updates and new details about where we’re headed, and what’s available.
In the meantime, here’s a little bit of recent history regarding the private student loan debt industry.
The Consumer Financial Protection Bureau
President Obama’s Administration created The Consumer Financial Protection Bureau (CFPB) and assigned them with the duty of making “markets for consumer financial products and services work for Americans”, which means that they’re supposed to fix problems with mortgages, credit cards and private student loan debt.
In fact, Congress actually passed a law requiring the CFPB to look into the student loans industry and start making regulatory recommendations for resolving problems that existing law is creating for borrowers.
During their initial review of the industry, the CFPB collected and published around 2,000 complaints gathered from consumers who had problems with getting or paying back private student loans, creating a great deal of new visibility for the issues that plague this industry.
Early Findings Showing Significant Problems:
- Information Problems – Borrowers with private student loans reported being confused about which student loans were worth taking and how much they would actually owe after graduation. Some borrowers were even surprised that their student loans were privately-backed, rather than provided by federal subsidies.
- Excessive Debt – People with private student loans reported that they have become completely overwhelmed by the excessive debt racked up by their student loans, especially from rising interest rates. The CFPB believes that part of the problem is a lack of sufficient disclosures, exacerbated by a weak economy, significant unemployment and underemployment, especially among recent graduates.
- Complicated Billing Practices – People responding to the survey reported that they wanted to pay back their private student loans, but that when they ran into tough financial times, there weren’t many options for receiving help with their loans in the form of repayment flexibility (refinancing interest rates, getting loan modifications for longer repayment terms, etc.).
As a response to the complaints that they collected, the CFPB issued a draft of proposed student loan disclosure forms that it wants the industry to use, but there’s currently no regulatory law in place that forces any lenders to put these into place.
The suggested disclosure form contains some important information that lenders have been allowed to leave out of their existing disclosures, like the interest rate on the loan and the eventual monthly payment borrowers will face, which should dramatically reduce confusion for borrowers.
The Campus Progress Proposal
Campus Progress, now called “Generation Progress“, proposed that the Federal Government could offer significant debt relief for private student loans by purchasing private student loans to lower interest rates, increase loan forgiveness and loan modification opportunities and essentially save those borrowers who are in terrible economic situations from further financial hardship.
Unfortunately, this plan would have been extremely expensive, and the CFRB rightly argued against it (though it sounds great to those of us with massive student loan debt), pointing out that a program like this would fuel riskier lending practices and continued abuse by rewarding those lenders who offered the riskiest loans, providing no future incentive for any lenders to behave in a responsible manner.
The Student Loan Forgiveness Act
In March 2012, the Student Loan Forgiveness Act (H.R. 4170) was introduced by Representative Hansen Clarke (Democrat, Michigan), which proposed some excellent ideas for improving federal student loan debt relief, as well as presenting an excellent opportunity to receive debt relief for private student loans.
Here are the major tenets of the bill:
- Consolidation Options for Private Student Loans – The bill proposed that some private student loans would be eligible for consolidation with federal student loans. Though the bill includes a large range of restrictions, just the idea that any private student loans would be allowed to get consolidated with federal loans would be a paradigm shift for the industry, and a welcome one at that.
- Improved Forgiveness for Federal Student Loans
- Interest Rate Protection for Federal Student Loans
Unfortunately, this bill hasn’t been passed and it doesn’t seem likely that it will receive any additional support any time soon either.
The student loans and financial services lobby is extremely powerful, wielding a great deal of influence over Congress via massive campaign contributions for those representatives that toe the industry line, and they don’t want this bill (or any other like it) to get passed.
The Student Loan Fairness Act
In March, 2013, Congresswomen Karen Bass (Democrat, California) proposed new legislation that would offer the 10-10 model available for borrowers with federal student loans, which caps monthly payments at 10% of their discretionary income, and offers full loan forgiveness after 10 years (120 months) of qualified payments, including debt forgiveness for any taxes that remained due on the left over debt.
Furthermore, and this is a huge one, the Student Loan Fairness Act would allow unemployed people with private student loan debt to defer their payments (without facing any penalties) until they were able to find a new job, and it would also allow those with private student loans to convert them into federal loans, affording them with full access to the excellent suite of available federal loan relief programs.
The Private Student Loan Bankruptcy Fairness Act
The fact that private students loans can’t be discharged via bankruptcy has rubbed Americans the wrong way for some time now, and support for changing the law to allow for it has never been higher.
A variety of efforts are currently underway to change the status quo here and allow for private student loan forgiveness via bankruptcy, including:
- Bill HR 532 – Proposed by Congressmen Danny David (Democrat, Illinois) and Steve Cohen (Democrat, Tennessee), this bill would change bankruptcy law to allow judges to handle private student loans the same way that they deal with any other form of debt from private lending institutions (meaning that it could be discharged via filing for bankruptcy)
Unfortunately, the CFPB, which is supposed to look out for borrowers interests, has taken an opposing stance to revising bankruptcy laws in this way, and is arguing that allowing for that would create another debt crisis like the one caused by sub-prime mortgages just a few years ago.
They even issued a report in July of 2012 claiming that allowing student loans to be discharged via bankruptcy would be the final nail in the coffin to our country’s economic recovery, and virtually guarantee the beginning of another major economic depression.
Credit Score Rehabilitation
Failing to repay student loans on time leads to terribly negative consequences for people’s credit scores, just like missing mortgage payments or credit card payments.
However, the CFRB has argued that new financial regulation should be created to help rehabilitate the credit scores of borrowers who had issues repaying their private student loans on time, once those loans were fully paid off.
A similar system is already in place for borrowers with public student loans, and it seems entirely reasonable that this system could work quite well if it were extended to cover private student loans as well.
The CFRB definitely appears interested in making that happen, but like we stated earlier, don’t expect it to be an easy fight as the financial services lobby is quite powerful.
While it would be great to see some new regulations for the private student loans industry, or new laws that offer debt relief opportunity to borrowers with private student loans, it’s always been unlikely that the Government would step in, simply because there are too many lobbyists preventing them from doing so.
The simple problem with private student loan debt is that the financial services industry is far too powerful, completely opposed to reform and unwilling to negotiate on something that has made them a massive profit, and will continue to profit huge profit margins in future years.
Attacking private student loans is attacking their golden goose, and as a result, it’s unlikely that we’ll see any major changes to the industry at any point in the near future, unless more lawsuits like the CFPB’s attack on Navient emerge, and more holes are poked in the dam.
Fortunately, I’m more optimistic about private student loan forgiveness than I’ve ever been, and I have a good feeling that the next few months and years are going to present some significant new opportunities for those of you struggling to deal with your private loan debt.
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