Biden announces $5 billion in student loan forgiveness. Here's what to do if you don't qualify.
In a move aimed at addressing the long-standing issues plaguing the U.S. student loan system, the Biden administration announced Friday that it approved an additional $4.9 billion in student loan debt relief for 73,600 borrowers. This announcement, which brings the total loan forgiveness approved by the administration to $136.6 billion for more than 3.7 million Americans, reflects the ongoing efforts to provide relief to student loan borrowers.
The discharges are the result of fixes to income-driven repayment (IDR) forgiveness and Public Service Loan Forgiveness (PSLF). According to U.S. Secretary of Education Miguel Cardona, the nearly $5 billion in additional debt relief will benefit teachers, social workers and other public servants who have earned PSLF. It will also assist borrowers qualifying for income-driven repayment forgiveness due to the accurate accounting of their payments, the administration says.
But while the new round of student loan forgiveness will provide welcome relief to tens of thousands of borrowers, not everyone will qualify. So what can you do if you don't qualify for this round of student loan forgiveness but still need relief from your student loan payments? The good news is that you have options to consider.
Find out more about how student loan refinancing could help you here.
What to do if you don't qualify for student loan forgiveness
The debt relief announced today by the Biden-Harris Administration is categorized as follows:
- $1.7 billion for 29,700 borrowers through administrative adjustments to IDR payment counts: These adjustments bring borrowers closer to forgiveness and address concerns regarding the misuse of forbearance by loan servicers.
- $3.2 billion for 43,900 borrowers through PSLF: This includes borrowers benefiting from the limited PSLF waiver and regulatory improvements made to the program by the Administration.
Learn more about the top student loan refinancing rates you could qualify for.
Alternative student loan relief options to consider
While the latest round of student loan relief is a significant step forward, unfortunately, not all borrowers may qualify for this type of debt relief. If you find yourself ineligible for this new student loan forgiveness, there are alternatives to consider, such as private student loan refinancing.
Private student loan refinancing involves replacing existing student loans with a new loan from a private lender. This new loan often comes with a lower interest rate, providing borrowers with potential long-term savings. Refinancing also allows for the consolidation of multiple loans into a single, more manageable monthly payment, simplifying budgeting and financial planning.
It's important to understand, though, that federal student loans offer unique protections to borrowers, so refinancing your federal student loans with private student loans may not make the most sense, even if your rate is lower. So before you make any decisions, just be sure to weigh the potential benefits of refinancing against the possible downsides of losing the protections offered to you by your federal loans.
Why it can make sense to refinance your private student loans
There are a few reasons why you may want to consider refinancing your student loans, including:
- Lower interest rates: Refinancing allows borrowers to secure a lower interest rate than what they currently have on their student loans. A lower interest rate can lead to substantial long-term savings.
- Simplified repayment: Refinancing provides an opportunity to consolidate multiple loans into a single, more manageable monthly payment. This simplification can make budgeting and financial planning easier.
- Flexible terms: Borrowers have the flexibility to choose new loan terms that better suit their financial situation. This could include extending the repayment period for lower monthly payments or opting for a shorter term to pay off the loan faster.
- Improved credit score: Successfully refinancing student loans can positively impact credit scores. Timely payments on the new loan can also contribute to a healthier credit profile.
- Release of co-signers: If you initially had a co-signer on your student loans, refinancing offers the possibility of releasing them from their obligations, provided you meet the lender's requirements.
The bottom line
The Biden administration's commitment to student loan forgiveness is clear in the latest announcement of substantial debt relief. However, for those who don't qualify for forgiveness, exploring alternative options, like private student loan refinancing, can provide financial relief and forge a pathway to more manageable repayment.
