Private student loans don’t offer loan forgiveness. But some loans amounting to $5 billion might just be wiped out for lack of critical documentation, the New York Times reported. These private student loans are subject to a legal dispute between borrowers and a group of lenders who sued them for defaulting on their loans per the report.
Possible Private Student Loan Forgiveness
In the current case, National Collegiate Student Loan Trust (NCSLT) has sued borrowers who defaulted on their private student loans in its capacity as owner of the loans. The trust has pursued collection on such defaulted loans via lawsuits filed in district courts.
NCSLT, according to NYT, is made up of 15 trusts holding $12 billion in student loans, $5 billion of which are in default status.
The issue at hand now concerns whether the umbrella trust really owns those defaulted loans, which have changed hands, with documents to prove NCSLT’s ownership of such loans reported to be missing.
Per the Times, scores of lawsuits against student loan borrowers have been dismissed over lack of ownership documentation, virtually wiping out such student loan debts.
Federal Student Loan Forgiveness
Except for extraordinary circumstances like the above calling for such, private student loans will not be forgiven. This option is however available to borrowers of federal student loans.
The PSLF or the Public Service Loan Forgiveness Program is backed by the federal government, encouraging borrowers to get into public service posts and have their federal student debt forgiven after 10 years of repayment.
The law behind the program was enacted in 2007 and 10 years later, in October 2017, the program will see its first batch of borrowers eligible for debt forgiveness.
However, President Trump’s proposed budget submitted to the U.S. Congress in May did cause confusion, to say the least. The POTUS as we previously reported proposed to eliminate the PSLF, calling for a single income-driven repayment plan that will offer forgiveness in its stead.
To be clear, the proposal if approved by Congress will not affect eligible borrowers slated to receive student loan forgiveness in October, nor other borrowers who already took federal student loans before July 1, 2018, as noted by Student Loan Hero.
Only those who get a federal student loan on or after July 1, 2018 will be affected by the proposal.