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In recent years, many political candidates have included either full or partial student loan forgiveness within their platforms. As a result, many borrowers are eagerly awaiting an announcement on whether any of the student loan forgiveness offers will come true.
With the federal student loan payment break set to expire on August 31, 2022, you might be especially keen to get loan forgiveness.
But even if a large scale discount occurs, there is no guarantee that your loans will be included. In fact, your student loans may not be forgiven for several reasons.
Before that happens, you can learn more about refinancing student loans and compare rates from multiple private student lenders by visiting Credible.
You have more than $50,000 in loans
Most student loan forgiveness proposals submitted have capped forgiveness at a certain amount of debt per borrower. President Joe Biden has proposed canceling up to $10,000 of federal student loan debt per borrower, while other proposals would cover up to $50,000 per borrower.
If student loan forgiveness becomes a reality, it is unlikely to cover the full amount of federal borrower debt. Therefore, if you have more than $50,000 of student loan debt — or more than $10,000 if Biden’s proposal wins — you’ll likely still have to pay what’s left.
POLL: MAJORITY OF AMERICANS SUPPORT CANCELLATION OF $10,000 IN STUDENT DEBT
Your income is too high to qualify for student loan forgiveness
If federal student loan forgiveness is offered, it will likely include an income cap, which means high-income borrowers — even those with large debt relative to their income — are unlikely to qualify.
Income limits on loan forgiveness vary from application to application. Media reports said the Biden administration was considering student loan forgiveness only for borrowers with incomes of $125,000 to $150,000 for single filers or $250,000 to $300,000 for married filers.
Income caps could be even lower if student loan forgiveness is finally offered. When the federal government offered Economic Impact Payments, they were only available to people with incomes up to $75,000 for single filers and $150,000 for married filers.
It is important to note that some borrowers are already eligible for student loan forgiveness through an existing program, including the Civil Service Loan Forgiveness Program. If you work in the civil service, it’s worth looking into whether you qualify for loan forgiveness.
You can easily compare prequalified rates from several lenders using Credible.
President Biden can’t forgive all student loans
Since it seems unlikely that the current Congress will pass student loan forgiveness, it would require executive action by President Biden. However, there has been some debate as to whether the president actually has the power to cancel some or all of the student loan debt.
Some congressional leaders, including Senate Majority Leader Chuck Schumer and Sen. Elizabeth Warren, have said the president has the power to forgive student loan debt. House Speaker Nancy Pelosi, meanwhile, said the power to cancel student loans rests solely with Congress.
Proposals have also been introduced in Congress that would end the current student loan hiatus and prevent the president from writing off student loan debt.
Ultimately, while President Biden may go ahead with limited student loan forgiveness, it seems unlikely that he will have the power to cancel all federal student loans. And since private lenders provide private student loans, the government student loan exemption would not apply to private student loans.
A GUIDE TO STUDENT LOAN REPAYMENT PROGRAMS
What to do while the CARES Act is still in effect
It remains to be decided whether President Biden will forgive some student loan debt. In the meantime, borrowers should plan to start making their loan repayments as normal when the payment break ends on August 31.
Here are the steps to take before payments resume:
- Take stock of your current loan situation. Like most borrowers, chances are you haven’t seen them in over two years. Take note of the amount of your debts, your monthly payments and your interest rate.
- Review your budget. You may want to see how your student loan payments fit into your budget. Start setting aside your monthly payment amount now, so you know you can afford it once payments resume.
If you won’t be able to pay your payments once they resume, you have several options.
First, if you are in financial difficulty, forbearance will still be available for federal student loans. Contact your loan officer as soon as possible if you need additional forbearance.
If you can’t afford to repay your loan, another option is to refinance your loans through a private lender for a lower interest rate. However, if you currently have federal loans, proceed with caution before refinancing them into a private loan. Once you do this, you will not be eligible for loan forgiveness and will not have access to most federal student loan protections.
To start refinancing your student loans, visit Credible and compare prequalified rates from several lenders.