Boston, MA – March 18: US Senator Elizabeth Warren cheering after a teachers testimonial of their … [+]
Borrowers with privately-owned school debt have a new option for student loan forgiveness. A major national private student loan lender has quietly released a new application that provides a limited, but very real, pathway to potential relief.
Typically, only federal student loans qualify for debt cancellation. Indeed, all of the student loan forgiveness initiatives that the Biden administration is in the process of implementing are only available to federally owned or federally backed student loans. Private student loan borrowers, which represent a relatively small but not insignificant share of total student debt, have been left out of this relief.
But Navient, one of the nation’s largest private student loan lenders, has a new loan forgiveness application for private student loans. Here are the details on who may qualify, and what borrowers should expect.
Student Loan Forgiveness Usually Limited To Federal Debt
The Biden administration has enacted close to $170 billion in student loan forgiveness, according to recent Education Department data. At least 4.75 million borrowers have benefited.
But this sweeping debt cancellation has only applied to federal student loans. The administration has focused on expanding relief under several existing federal loan forgiveness programs such as Income-Driven Repayment, Public Service Loan Forgiveness, and disability discharges. The results have been unprecedented — but only federal student loans qualify.
Purely private student loans are ineligible for federal student loan repayment and forgiveness programs, and can’t be consolidated or converted into a federal loan. Private loans aren’t established or funded by Congress and are not subject to executive authority in the same way that federal student loans are, leaving President Biden with few legal options for providing relief to private loan borrowers. Typically, these types of loans have more limited repayment options, and they may also have much higher interest rates than their federal counterparts.
New Private Student Loan Forgiveness Application For Defrauded Borrowers
Without any formal announcement or statement, Navient has released a private student loan forgiveness application for borrowers who have been defrauded by their schools.
“Navient began quietly sending its new application to a select few borrowers,” said the Project on Predatory Student Lending, a legal and advocacy organization for student loan borrowers. “The application allows borrowers who experienced misconduct at their school to apply directly for discharge of private loans, marking a long overdue recognition of borrower rights.”
The application appears to closely mirror Borrower Defense to Repayment, a program under federal law that allow borrowers to request a discharge of federal student debt if their school made misrepresentations or false promises about central elements of the underlying educational program. These can include lies, omissions, or exaggerations about admissions selectivity, career services, potential employment earnings, accreditation, or transferability of credits to another institution.
Navient has not publicized the availability of the new private student loan forgiveness application, so the Project on Predatory Student Lending took steps last week to alert the public.
“Today we are making a concerted effort to illuminate the pathways to cancellation available to student borrowers with private loans who were cheated by their schools. Private student loans have always carried basic consumer protections like borrower defense, yet lenders and servicers have obstructed borrower efforts to realize them, individually or at scale,” said Eileen Connor, President and Executive Director of PPSL, in a statement. “This Navient application is an opportunity for borrowers who experienced misconduct to finally seek relief for their private loans and is a direct result of our clients’ persistence.”
Senator Elizabeth Warren (D-MA) offered tempered praise to Navient for releasing the application, but criticized the company for not making the process clear or easy for those who have been harmed by school misconduct. “Navient has admitted responsibility for canceling their predatory loans but set up a process for cancellation that’s impossibly confusing for borrowers,” she said in a statement. “I won’t let Navient get away with cheating defrauded student loan borrowers out of the relief they deserve.”
Relief Through New Private Student Loan Forgiveness Application Is Limited But Very Real
Borrowers should be aware that this private student loan forgiveness opportunity is fairly limited. Private student debt is still ineligible for loan forgiveness based on a borrower’s employment with public service organizations, repayment of their loans based on income, or financial hardships (outside of bankruptcy).
The Navient debt relief program is specifically for borrowers who allege that their school engaged in certain kinds of misconduct. Other problems a borrower may be experiencing, such as difficulty affording their payments, are not a basis for loan forgiveness under this program. Unlike the similar federal Borrower Defense to Repayment program, the Navient application requires that borrowers include supporting documentation with their application.
And this application is only available to borrowers with Navient private student loans. Other private student loan lenders do not have this same application option. “PPSL is not aware of any similar private student loan cancellation process for private student loan holders besides Navient,” said the group in its statement. Nevertheless, PPSL encouraged borrowers with other kinds of private student loans to contact their servicer.
Still, the new program appears to be legitimate and is actually resulting in relief. According to the PPSL and the New York Times, at least some borrowers have received student loan forgiveness from Navient through this new application process, sometimes just weeks after applying. In contrast, it can take years for borrowers to receive decisions under the federal Borrower Defense to Repayment program.
Other Federal Student Loan Forgiveness Approvals Coming
The new Navient private student loan forgiveness pathway is independent of the numerous federal student loan forgiveness initiatives being implemented by the Biden administration.
Last month, the administration approved another $7.7 billion in student loan forgiveness for 160,000 borrowers. Borrowers received relief through the PSLF program, the IDR Account Adjustment (the administration recently extended a key deadline for that program to the end of June), and the new SAVE plan.
The Biden administration is also finalizing a new mass student loan forgiveness plan that could provide partial or complete debt cancellation to more than 25 million federal loan borrowers. The new program is expected to debut this September or October, but will likely face legal challenges.
