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Student loan borrowers with significant amounts of debt received some welcome news this week after the White House revealed the approval of $7.7 billion in student loan forgiveness. The latest round of forgiveness will extend to 160,500 additional borrowers. In total, the Biden administration will now forgive $167 billion in student loans for 4.75 million people.
Those who qualify for this round of forgiveness, according to the administration,”are people enrolled in my Administration’s SAVE Plan; are public service workers like teachers, nurses, or law enforcement officials; or are borrowers who were approved for relief because of fixes we made to Income-Driven Repayment.”
The SAVE program, in particular, ties the monthly payments borrowers need to repay to their overall income, thus lowering their payments and, theoretically, offsetting previous repayment programs in which interest spiraled out of control.
But what about borrowers who don’t qualify for this round of student loan forgiveness — and haven’t qualified in previous rounds, either? Fortunately, there are still ways for these borrowers to save, too. Below, we’ll break down one of the best ways to do so.
Start by exploring your student loan refinancing options online today.
What to do if you don’t qualify for student loan forgiveness
For starters, it’s important to note that the student loan forgiveness extended by the White House to date has been for federal student loans, not private ones. So, if you have private student loans, you won’t qualify for forgiveness from the federal government now, or in the future, barring some dramatic change. However, you can still cut the costs of your loan now, even if you may not be able to eliminate it in its entirety.
By refinancing your private student loan, you may be able to get a lower interest rate than what you’re currently paying, saving you money on both your monthly payments and the interest you pay over the life of the loan. This involves taking out a new loan at a presumably better rate and terms and paying off your old one with it.
You can technically refinance your federal student loan with a private one (something some people may be considering if they haven’t qualified for forgiveness to date). However, that’s usually frowned upon, as you will lose protections like forbearance or forgiveness in the future if you make your federal loan a private one. Still, it is a possibility and is perhaps worth doing if your current federal student loan rates are prohibitive and difficult to manage in today’s high-rate climate.
Explore today’s student loan refinance rates here now.
Shop around
If you’re ready to refinance your student loan, be sure to shop around for lenders. Don’t just take the first offer you receive — and consider lenders aside from just the one you’re currently using. By shopping around and getting estimates from at least three other lenders, you’ll improve your chances of securing the lowest rate possible. But be sure to read the terms and conditions carefully so that fees or other penalties don’t offset what otherwise would have been a cost-effective loan.
Other effective ways to get a cost-effective rate are to consider the term (shorter terms can come with better rates) and consider adding a co-signer to let your lender know that you have substantive credit means to pay back the new loan.
The bottom line
The Biden administration has forgiven more than $160 billion worth of federal student loans to date, including another round this week. But if you haven’t qualified yet, it may be time to consider student loan refinancing. While the benefits of doing so are generally more applicable for private borrowers versus federal student loan borrowers, there may be circumstances in which federal borrowers can also benefit. Just be sure to shop around to find a loan with the lowest rate and best terms in order to make the switch as valuable as it can be.
Matt Richardson is the managing editor for the Managing Your Money section for CBSNews.com. He writes and edits content about personal finance ranging from savings to investing to insurance.
