What if you don’t qualify for student loan forgiveness?
Millions of Federal Student Loan Holders Have Opportunity to Get Relief with President Bidento write off $10,000 — maybe even more for some low-income borrowers — in student loan debt per borrower.
Mr Biden said he was keeping his “campaign promise” to “give working and middle-class families some breathing space” before the federal moratorium on student loan payments ends in January 2023. may not be the case. but it still helps a large portion of the 43 million federal borrowers who collectively owe more than $1.7 trillion.
Although this plan does not apply to private student borrowers, there are still options for obtaining assistance. Consult a private lender to see your options and find out how you can save money.
Which student loans are not eligible for forgiveness?
, by definition, are private and cannot be forgiven. These are loans that the borrower owes to student loan providers and not to the federal government. Mr. Biden’s plan will not change the way these are repaid and borrowers should expect to continue to repay them as they have done so far.
While it’s theoretically possible that the government could pay private lenders individually and thereby erase borrowers’ debt to those providers, it’s not something Mr. Biden announced, offered, or even seriously suggested.
In short: if you have student loan debt, regardless of the amount, that is owed to a private lender, this news will not apply to you.
What to do if you don’t qualify for student loan forgiveness
If the debt is large and you’re having trouble paying it, you have options. Refinancing a private student loan has multiple benefits and should be pursued immediately if the alternative is default.
With a student loan refinance, you essentially consolidate your private or federal student loans into one new loan (hopefully with a lower interest rate). However, you should try to avoid doing this with federal student loans, as you will lose all the benefits and advantages that come with them, including eligibility for Mr. Biden’s pardon program.
Benefits of Student Loan Refinancing
There are several benefits of a refi student loan if you are a private student loan borrower, including:
- Possibility of lower interest rates
- Student loan consolidation
- Possibility to modify or delete one or more co-signers
- Potential savings over the life of the loan
This list is not exhaustive and fees, rates and offers vary by lender, so be sure to do your research. Compare student loan offers now.
Disadvantages of Student Loan Refinancing
While refinancing your student loan can have several advantages (if you get the right loan), there are some possible downsides:
- Not everyone is eligible for a refi student loan
- You are not guaranteed a lower interest rate (depends on your credit score and overall financial health)
- You may only be able to choose a variable interest rate instead of a fixed rate (meaning rates can change)
- This can extend the term of your loan (if you choose a longer plan)
In addition to these points, you would have even more disadvantages if you choose to refinance a federal student loan into a private student loan. As mentioned above, you would lose benefits and protections such as eligibility for student loan forgiveness, income-oriented repayment plans, capital rebates and more. Think long and hard before doing anything with a federal loan.
Who is now eligible for student loan forgiveness?
Under Mr. Biden’s student loan forgiveness plan, millions of borrowers earning less than $125,000 a year or households earning less than $250,000 a year would receive $10,000 back – and some Americans Low-income earners eligible for Pell Grants could get an additional $10,000. (Note: Your relief will be capped at your total outstanding debt, so you won’t be able to keep any additional money if you have less than $10,000 left on the loan.)
“No high-income individual or high-income household in the top 5% of income, by the way, will benefit from this action, period,” Biden said.
According to Biden, 27 million people will receive $20,000 in debt relief and 20 million people will have their student debt entirely forgiven under this new program.
Other Student Loan Cancellation Plans
If you have more than $10,000 in federal student debt or don’t qualify for Mr. Biden’s forgiveness plan, you may also want to research other:
- Loan forgiveness to teachers: For full-time teachers who have worked five full, consecutive years in certain schools or departments that serve low-income students.
- Waiver of public service loan (PSLF): For full-time government or non-profit employees who have made at least 10 years of payments (120 qualifying payments).
- Income Contingent Reimbursement (IDR) Plans: For those repaying loans under an income-contingent repayment program. The Biden administration is proposing new rules to make this plan more inclusive and help lower monthly payments (learn more).
- Military service: For eligible members of the United States Armed Forces (learn more).
- US Corps: For those who have successfully completed an approved AmeriCorps program.