Private loans are very difficult to cancel. Private loan cancellation and forgiveness programs are not required by law, and borrowers do not have the same options to cancel or have their private loans forgiven as they do with their federal student loans.
While loan forgiveness and cancellation programs are very rare for private student loans, some lenders do offer these programs depending on your circumstances, such as your disability or if the primary borrower of a loan you co-signed for dies.
You can ask your private lender if they offer cancellation and forgiveness programs, but these lenders are not required by law to help you unless they promised to offer these programs in your loan agreement.
Read your loan agreement very carefully to learn about your private loan’s particular terms, conditions, benefits, rates, fees, and penalties. Private lenders have to honor any promises they make to you about your loan terms and benefits. Some private lenders offer a cancellation program for some loan products, but not others. Some will offer to cancel only a portion of a loan in certain circumstances. Ask your lender and review your loan agreement for more information.
There may be tax consequences for any of your student loan debts that are canceled or forgiven. Talk to a tax professional for more information.
Filing for Bankruptcy
It is difficult, but not impossible to discharge student loan debt in bankruptcy. You can discharge federal and private student loans in bankruptcy. Bankruptcy is often considered a last resort option because of the impacts it can have on your credit and the costs and time involved in filing for bankruptcy. That being said, if you are struggling with debt and have student loans, it may be worth talking to an experienced bankruptcy attorney about your options.
If you file for bankruptcy, any collections and payments on your student loans and other debts will automatically be paused by the bankruptcy court until the case is over or a judge says that payments should restart.
Your student loans will not be automatically discharged if your bankruptcy is approved. You have to take special steps in the bankruptcy case to ask the judge to discharge your student loans, including most private student loans. This is done by filing a petition for an adversary proceeding. There may be cases where you don’t have to file this petition to have your private student loans discharged, but it is complicated, and you should talk to a bankruptcy attorney in order to find out what you need to do in your situation.
In order to have your private student loans discharged in bankruptcy, you usually have to show that you have an undue hardship. There is no rule about what the court has to consider when it decides if paying back your private student loans would cause you an undue hardship. Some of the factors the court may consider when deciding whether or not you have an undue hardship may be the same as what the court considers for federal student loans.
These factors include:
- Present Ability to Pay: if you’re forced to repay your student loans, will you be able to maintain a minimal standard of living?
- Future Ability to Pay: can you show that your hardship will continue for a significant amount of the time left on repaying your loans?
- Good Faith Effort to Repay: have you made good faith efforts to repay your student loans before filing for bankruptcy? Have you contacted your lender regarding payment options for your loan prior to filing for bankruptcy?
For more information, see our page on discharging loans in bankruptcy. Although this page has more information about federal student loans in bankruptcy, the process for discharging private student loans is similar.
The Consumer Financial Protection Bureau also has a page on its website with important information and tips for discharging private student loans in bankruptcy.
Were You the Victim of a For-Profit School?
State and federal governments sometimes file lawsuits against schools that misled or lied to students and and borrowers. The lawsuits sometimes result in judgments or settlements that provide relief to students who were victims. You may be eligible for relief from your private loans if you were a victim. The relief is generally limited. Most state and federal agencies will reach out to students and borrowers they think are victims who are eligible for relief. Make sure to review any letters or notices you get about these lawsuits very carefully. You can contact your state student loan or consumer protection agency for more information, or file a complaint with the Consumer Financial Protection Bureau (CFPB), a federal agency that protects private student loan borrowers.