Are you eligible for student loan forgiveness if you have private and federal loans?
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The student loan repayment landscape just got a lot more complicated for borrowers to navigate — and those with federal student loans, in particular, are now facing unique challenges. Major changes to the federal student loan system took effect July 1, which includes new repayment options and changes that impact how borrowers manage their federal student loan debt. At the same time, millions of borrowers are still trying to determine which student loan relief programs may apply to the loans they already have.
Determining repayment options can be especially challenging, though, if your education was financed with more than one type of student loan. You may, for example, have federal Direct Loans from your undergraduate years but also have private student loans you took out to cover funding gaps, attend graduate school or refinance an older balance. While those loans may all appear under the same student debt category in your budget, they don’t necessarily come with the same repayment protections.
And that distinction can become particularly important if you’re hoping to have some of your student loan debt forgiven. The rules governing federal and private student debt are substantially different, after all, so having both types of loans can affect which balances qualify for relief — and what you may need to do with the debt that remains.
Compare your private student loans to find the right options today.
Are you eligible for student loan forgiveness if you have private and federal loans?
Having private student loans doesn’t automatically prevent you from qualifying for federal student loan forgiveness. Eligibility generally depends on whether your federal loans meet the requirements of a particular forgiveness or discharge program. Your private student loans are evaluated separately and generally aren’t eligible for federal forgiveness programs.
For example, that means a borrower with $40,000 in federal student loans and $20,000 in private student loans could potentially qualify to have some or all of the eligible federal balance forgiven while remaining responsible for the $20,000 private balance.
There are a few different routes to having your federal student loans forgiven. Depending on your circumstances and loan type, federal forgiveness or discharge options can include:
- Public Service Loan Forgiveness (PSLF): Eligible borrowers working full-time for qualifying government or nonprofit employers can have the remaining balance on their Direct Loans forgiven after making 120 qualifying monthly payments while meeting the program’s requirements.
- Income-driven repayment forgiveness: Certain income-driven repayment plans can result in forgiveness of the remaining eligible federal loan balance after the required repayment period. The specific timeline and eligibility rules depend on the repayment plan and when the loans were borrowed.
- Teacher Loan Forgiveness: Certain teachers who work for qualifying schools or educational service agencies may be eligible to have a portion of their federal student loan debt forgiven.
- Federal loan discharges: Qualifying borrowers may also have federal student loans discharged under certain circumstances, such as total and permanent disability, school closure or borrower defense to repayment.
Private student loans, however, aren’t covered by these federal forgiveness programs. A private lender may offer its own discharge provisions in limited circumstances, such as a borrower’s death or permanent disability, but those policies depend on the lender and student loan agreement. Private lenders generally aren’t required to provide the same discharge protections that are available with federal loans.
In turn, it’s important to be cautious about refinancing federal loans into private student loans if you’re pursuing federal forgiveness. Refinancing federal student loans through a private lender converts them into private debt, which means you generally give up access to federal forgiveness programs and other federal borrower protections.
Find out how affordable a private student loan could be now.
What options do you have if you aren’t eligible for student loan forgiveness?
You aren’t necessarily stuck with your current repayment strategy if you don’t qualify for student loan forgiveness. In this case, it may make sense to evaluate your federal and private balances separately and look for ways to make each more manageable instead.
For federal loans, start by reviewing the repayment plans available to you. The federal repayment system changed significantly last month, including the introduction of the Repayment Assistance Plan (RAP) and Tiered Standard Plan. The plans you’re eligible for depends partly on when your student loans were first disbursed, so comparing your current payment with the available alternatives could uncover a more affordable option.
If your private student loan payments are the bigger problem, you can contact your lender to ask whether it offers hardship assistance, temporary payment reductions or other relief. Note, though, that the available options vary considerably by lender.
You could also consider refinancing your private student loans if your credit and income allow you to qualify for better terms. A lower interest rate could reduce the amount of interest you pay or help lower your monthly payments, depending on the loan term you choose. Just remember that extending your repayment term to reduce your payment can increase your total interest costs.
And if you have both private and federal loans, you don’t necessarily have to refinance them together. Keeping eligible federal loans within the federal system while refinancing only your private balances may allow you to pursue a lower rate on the private debt without sacrificing federal protections on the rest.
The bottom line
Having both private and federal student loans can add another layer of complexity to the repayment process, but it doesn’t necessarily shut the door on student loan forgiveness. What matters most is the type of debt you’re trying to have forgiven and whether your federal loans, employment or repayment history meet the requirements of an available program. If forgiveness isn’t an option or only addresses part of the problem, consider treating your federal and private balances as separate problems. The right combination of a federal repayment plan and private loan refinancing or hardship assistance could make the remaining debt easier to manage.
