Will private student loans be canceled under Biden’s plan?

University student sitting outside on steps and using laptop
President Biden recently announced plans for federal student loan forgiveness. But what about private loans?

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President Biden describes his plan to forgive up to $20,000 in student loan debt for qualified federal loan holders to “relieve the millions of borrowers who need it most.”

Eligibility criteria were broad and covered a range of people with federal student loan debt. Specifically, those earning less than $125,000 per year (less than $250,000 per year per couple) can see up to $10,000 of their federal student loans forgiven. And borrowers with Pell Grants (traditionally given to students with the highest financial need) can potentially qualify for an additional $10,000 in student debt forgiveness.

Biden said the move would affect about 43 million federal student loan borrowers. Nearly 90% of people who will benefit from the plan earn less than $75,000 a year, Biden noted.

But what about borrowers who don’t qualify for the forgiveness? Those with private student loans, in particular, are ineligible for Biden’s plan and there doesn’t appear to be any immediate relief on the horizon.

Student loan refinancing, in this case, is worth exploring. Borrowers should take a few minutes now to determine if they qualify for a lower rate, thus reducing their monthly payments.

Refinancing private student loans, at least in the current economic environment, is the best way for these borrowers to get immediate relief. The outlook for cancellation of private student loans, meanwhile, is murky.

Will private student loans be forgiven?

The short answer? Cancellation of a private student loan is not impossible, but it is unlikely. After all, Mr. Biden’s action is tied to the federal government. Loans due to private lenders are different.

Mr. Biden’s reach is unlikely to extend much further. Theoretically, he could attempt to have the government wipe out the balance sheets of certain private lenders, thereby erasing the debt that borrowers owe those individual lenders. But it’s not something he announced, offered, or even seriously suggested.

With that in mind, private student borrowers looking to cut costs should instead look to refinancing as the best solution. You can start by comparing student loan refinance offers today. Refinancing may not be as important as forgiveness, but it will help borrowers.

Private Student Loan Forgiveness Alternatives

  • Paid payment. It’s not just given, but borrowers could potentially request (and possibly get) a break if they ask their private lender.
  • Monthly payment or lower interest rates. Likewise, this will not be offered but could possibly be requested during a call from the borrower to the lender.
  • Student loan consolidation. You may be able to change the terms of your loans and consolidate them at a lower interest rate. It is worth asking the lender if this option is possible.

Still not sure if these options are best for your private student loan? Analyze the numbers and see if refinancing is right for you. You can start the process now.

Other Student Loan Cancellation Plans

If you are firmly committed to net forgiveness of your loans, you can potentially qualify for other forgiveness plans.

Depending on your personal financial situation, career, or military history, you may qualify for other student loan forgiveness programs. Specifically, you can apply for:

  • 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).
  • Volunteer: Those who have successfully completed an approved AmeriCorps or Peace Corps may qualify.

There are also other measures which, although not as helpful as forgiveness, can potentially help private borrowers.