Here’s What to Do if President Biden Doesn’t Forgive Student LoansOctober 22, 2021
Ever since President Biden was elected into office, student loan borrowers have been hopeful. During his campaign, Biden championed the idea of $10,000 in student loan forgiveness for all student loan borrowers. Following his election, some Democratic leaders have encouraged him to go further, advocating for $50,000 of loan forgiveness.
For borrowers that thought their loans would be eliminated, it’s been a bit of a disappointment. While Biden has supported some student loan changes, there’s been no all-encompassing forgiveness effort, and the student loan relief measures from the Coronavirus Aid, Relief, and Economic Security (CARES) Act will soon expire. Federal student loan forgiveness is seeming more and more unlikely.
When it comes to Biden student loan forgiveness, his proposals may not come to fruition. If that’s the case, now is the time to make your student loan repayment strategy — and come up with a plan to pay them off for good.
Will Biden Forgive Student Loans?
For some borrowers, student loan forgiveness has already happened. Since March 2021, the Biden Administration passed measures that forgave nearly $10 billion in student loan debt. However, the measures were very targeted, helping borrowers with disabilities and those defrauded by closed schools.
The $10,000 Biden student loan forgiveness is still in the works and hotly debated. Will it happen? No one knows for sure.
What we do know is that any new forgiveness programs — whether it’s $10,000, $50,000, or 100% of outstanding student loans — will only affect federal student loan borrowers. Private student loan forgiveness is not being explored at this time.
5 Things to Do If Federal Student Loan Forgiveness Doesn’t Happen
While you may believe that Biden student loan forgiveness will still happen, you should keep this saying in mind: hope for the best, but plan for the worst. That way, loan forgiveness will be a happy surprise, but if it doesn’t happen, you won’t be scrambling to come up with a solution.
If loan forgiveness doesn’t happen, here are five things you can do to manage your debt:
1. Explore Alternative Payment Plans
If you have federal student loans and your payments are too high, enroll in an income-driven repayment (IDR) plan. Based on a longer repayment term and your discretionary income, an IDR plan could dramatically lower your monthly payments. Some borrowers even qualify for payments as low as $5 per month.
Plus, you could get partial loan forgiveness through an IDR plan. Depending on what plan you’re on, your new repayment term could be 20 or 25 years. If you still have a balance at the end of your loan term, the government will eliminate the remainder. Best of all, new measures were passed that make the amount forgiven non-taxable.
Private student loan borrowers aren’t eligible for IDR plans. But some lenders do offer reduced payment plans for borrowers experiencing financial hardships, so contact your lender to discuss your situation.
2. Request Forbearance or Deferment
Federal loan borrowers that are ill, unemployed, or going through financial issues can request a forbearance or deferment by contacting their loan servicers. These options allow you to postpone your payments temporarily, and some forbearance and deferment programs can be renewed, allowing you to postpone your payments for 12 to 36 months.
Private loans don’t have the same forbearance or deferment programs as federal loans, but your lender may offer its own forbearance program. Reach out to your lender to explain your circumstances and find out your options.
3. Take Advantage of Existing Forgiveness Programs
- PSLF: If you work for a non-profit or government agency, you could qualify for PSLF. You must work for a qualifying employer for at least 10 years and make 120 monthly payments.
- Teacher Loan Forgiveness: You can get up to $17,500 if you teach for at least five full academic years in a high-need subject in a qualifying low-income school.
There are also state student loan forgiveness programs. If you commit to working in a high-need area for a set period, you could get money to pay off some or all of your student loans. Unlike federal student loan forgiveness programs, these programs can sometimes be used to pay off both federal and private student loans. For example, healthcare professionals in Kansas can get up to $25,000 per year through the Kansas State Loan Repayment Program.
Contact your state education agency to find out if these types of programs exist in your area.
4. Pay Extra Toward Your Loans
Suppose you can afford your current payments, but you want to get rid of your loans as quickly as you can. Try to pay more than the minimum amount each month. Even an extra payment of just $25 can help you pay off your loans much faster.
For example, if you had $30,000 in student loans with a 5% interest rate and 10-year repayment term, your minimum payment would be $318 per month. If you increased it by $25 and paid $343 per month, you’d pay off your loans 10 months early. And, you’d save about $800 in interest charges.
To free up extra money to put toward your loans, consider canceling streaming services, cooking meals at home more, getting a roommate, or picking up a side hustle.
5. Refinance Your Student Loans
If your goal is to pay off your loans faster and save money, student loan refinancing can be a powerful tool. With good credit and stable income — or a cosigner that’s willing to help you — you could qualify for a loan with a better interest rate than you have now. With a lower rate, more of your payment will go toward the principal rather than accrued interest, helping you save money.
For example, let’s say you refinanced the loan above and qualified for a 10-year loan at 3.5% interest. Your monthly payment would drop by about $20, but even with the lower payment, you’d save over $2,500 in interest charges thanks to the lower rate.
|Original Loan||Refinanced Loan|
|Term||10 Years||10 Years|
|Total Savings: $2,585|
Use ELFI’s student loan refinance calculator to find out how much you could save.*
Preparing for Student Loan Payments to Restart
Will President Biden forgive student loans soon? While no one can say for sure, it’s looking unlikely. Even if it does happen, it will likely only forgive about $10,000 for federal student loan borrowers, so you’ll still be responsible for repaying the vast majority of your debt. Spend some time now — before federal loan payments are due again — coming up with a plan to tackle your debt, so you’re not caught by surprise.