President Joe Biden made several promises during his presidential campaign to save student loan debt. But not all borrowers qualify. Find out if you qualify for a student loan forgiveness under the Biden plan. (iStock)
During his presidential campaign, President Joe Biden made several promises in his student debt reduction plan, including:
- Immediate $ 10,000 Cash Back on Federal Loans
- The ability to attend a public college tuition-free if your family income is less than $ 125,000
- Reduce public service loan forgiveness (PSLF) requirements
So if Biden’s presidential plan goes ahead, maybe it’s time to ask if you’re going eligible for a student loan forgiveness?
Who is eligible for the student loan forgiveness?
In 2020, about one in four adults (nearly 45 million Americans) owed student loans. Added together, they were equivalent to more than $ 1.5 trillion, according to Brookings Research. Biden’s “education beyond the high school agendaCalls for making public colleges and universities free for all students with a family income of less than $ 125,000.
A Biden presidency can also request the cancellation on how to file bankruptcy of up to $ 10,000 in federal student loans for eligible borrowers. The trap ? Student loan cancellation does not apply to private student loans.
If you have private student loans, refinancing your loans could still save you money. Use an online student loan refinance calculatorto get an idea of what your new monthly payments might be. You can also use Credible to compare rates and lenders in just a few minutes.
How Much Student Loan Debt Will Be Forgiven?
Right now, a Biden presidency would demand the cancellation of up to $ 10,000 in federal student loans. If you earn $ 25,000 or less per year, you will not owe any payments on your federal undergraduate student loans and you will not earn any interest on your loans under the Biden plan.
If you earn $ 25,000 or more per year, you pay 5% of your discretionary income towards your federal loans. After 20 years, if you have made all of your payments through the program, the rest of the federal loans will be 100% forgiven.
What if you have private student loans?
Students with private student loans don’t catch the same break students do with federal loans under the Biden plan. But, thanks to the CARES Act and all-time low interest rates, refinancing your student loans now could save you a lot.
If you have a private student loan that you are considering refinancing, you can still use the Credible Multi-Lender Marketplace. With a private student loan refinance, all you have to do is fill out a form to compare prices and access options from several lenders.
But refinancing doesn’t benefit everyone, so weigh the pros and cons before you decide.
- You can get a lower interest rate by refinancing your student loans. If you have good credit or a co-signer on your loans, lenders will reward you with a lower interest rate, which means you’ll pay much less interest over time.
- A single monthly payment makes budgeting much easier. Refinancing gives you the option of combining multiple loans into one new loan. Instead of keeping track of multiple bills, all you have to do is remember one payment each month.
- Adjusting the length of your loan can reduce your payment. Refinancing also allows you to change your repayment terms. If you choose a shorter term, your monthly payment may increase, but you will pay off your loan faster. A longer term will likely lower your monthly payment, but you will pay more interest.
- Changing your lender can give you better rates and terms. When you refinance your student loans, you also have the option of switching lenders. A new bank, credit union, or online lender may offer better rates and terms than your current loan.
Don’t know how much you’ll save by refinancing? Use an online tool likeCredible to display a rate table that compares the rates of several lenders at once.
- You could lose access to federal programs. Since you refinance your loans with a private lender, such as a bank or credit union, once you refinance your federal student loans, you lose access to federal programs. Programs may include income-based repayment plans, student loan abstention, and the civil service loan forgiveness program.
- Most government loans come with flexible repayment terms. Most private loans don’t. Once you choose your terms, you’re stuck unless you refinance again.
- It can be much more difficult to qualify for private loans vs federal loans. To apply for a private loan, lenders look at your credit rating and history, as well as your stable income and job. While you can get a better rate with a private loan, only borrowers with a good credit rating (usually 650 or better) will get the best rates.
There might not be a better time to refinance than now. Interest is temporarily at 0% on federal student loans to provide relief for student loan borrowers during COVID-19. Borrowers are also automatically on administrative forbearance, which means that all monthly loan payments are temporarily suspended. This relief was supposed to end on December 31, 2020, but was extended until the end of January 2021.