Total student debt outstanding continues to climb as many borrowers do not have access to debt relief programs, such as student loan forgiveness. But even if President Joe Biden is able to deliver on his campaign promise to cancel $10,000 in federal student debt per borrower, not everyone will be eligible.
An example of this is private student loan debt, which is held by banks and online lenders instead of the federal government. About 2.4 million Americans have private student loans, collectively owing $132 billion, according to the Education Data Initiative.
Private student loans may not be eligible for general student loan forgiveness measures whether the Biden administration is somehow able to enact such legislation. Additionally, private loans are not eligible for release through existing federal student loan relief programs, such as the Public Service Loan Relief Program (PSLF).
Keep reading to learn more about who doesn’t qualify for student loan forgiveness, as well as what borrowers can do to reduce their student debt. One option is to refinance a new private loan at a lower interest rate. You can compare student loan refinance rates on Credible for free without affecting your credit score.
HERE’S WHO QUALIFIED FOR STUDENT LOAN FORGIVENESS UNDER PRESIDENT BIDEN
Private student loans will not qualify for the federal exemption
The vast majority of student borrowers have federal loans, which are administered by the Department of Education. But millions of borrowers have private student loan debt held by third-party financial institutions.
Since private student loans do not belong to the federal government, they would not be eligible for federal student loan forgiveness. Private loans were also not eligible for the COVID-19 administrative forbearance, which temporarily suspended payments and interest on federal student loans until May 1, 2022.
The reason why private loans would likely not qualify for federal relief is due in part to the legal precedent set by the Higher Education Act of 1965. This Act gives the Secretary of Education the power to “make apply, pay, impair, waive or release any right “to collect on federal student loans, but this does not extend to loans held by private lenders.
Theoretically, the federal government could reimburse private lenders to effectively discharge student loan debt, but that would be a complicated process that is not currently being discussed at the federal level. The current proposal from Senate Democrats to implement $10,000 student loan relief applies only to federal borrowers.
Private student borrowers who would not qualify for federal debt forgiveness could consider other student loan repayment options, such as refinancing. Student loan refinancing involves taking out a new private loan with better terms to pay off your existing student debt. Refinancing at a lower interest rate can help you lower your monthly student loan payments, pay off debt faster, and save money over time.
You can learn more about student loan refinancing by contacting a knowledgeable loan expert at Credible. Then you can decide if refinancing is the right repayment plan for your financial situation.
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What to do if you don’t qualify for student loan forgiveness
Borrowers with private student loan debt are unlikely to qualify for federal loan forgiveness, which means private borrowers could explore their alternative debt repayment strategies. If you’re struggling to repay your private student loan, here are some things to consider:
- Talk to your lender. Depending on your situation, you may qualify for a private student loan forbearance or deferral. Keep in mind that interest may accrue on your loans while you’re not in repayment, which adds to the total cost of the loan.
- Ask your employer about student loan repayment assistance programs. Some companies offer a student loan matching benefit, in which they help you pay off your student loan balance. If you are looking for a new job, look for employers who offer this benefit.
- Refinance your student loan debt. According to data from Credible, private student loan refinance rates are near record lows. It may be possible to lock in a lower interest rate on your student loans, which can help you lower your monthly payments and pay off your debt faster.
It’s important to note that refinancing your federal student loans into a private loan would make you ineligible for any future widespread loan forgiveness, such as the measures proposed by the Biden administration and several prominent Democrats. But if you have private student loans that wouldn’t qualify for forgiveness, you have nothing to lose by refinancing at a lower rate.
You can browse current student loan refinance rates from private lenders in the table below and visit Credible to see the offers that are right for you. If you’re still not sure If this debt repayment strategy is right for you, use a student loan refinance calculator to estimate your potential savings.
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