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MoneyWatch: Managing Your Money
August 25, 2022 / 3:39 PM / CBS News President Biden outlined his plan to cancel up to $20,000 in student loan debt for qualified federal loan holders to give "relief to the millions of borrowers who need it the most." The eligibility qualifications were wide and covered a range of those with federal student loan debt. Specifically, those earning less than $125,000 annually (less than $250,000 per year per couple) can have up to $10,000 of their federal student loans forgiven. And borrowers with Pell Grants (traditionally provided to students with the highest financial need) can possibly qualify for an additional $10,000 in student debt forgiveness. Mr. Biden said the move would affect approximately 43 million federal student loan borrowers. Nearly 90% of people who will benefit from the plan are making less than $75,000 annually, Mr. Biden noted. But what about the borrowers who don't qualify for forgiveness? Those with private student loans, specifically, are not eligible for Biden's plan and there doesn't seem to be 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 such borrowers to get immediate relief. The outlook for private student loan forgiveness, meanwhile, is murky. Will private student loans be forgiven?The short answer? Private student loan forgiveness isn't impossible but it's unlikely. After all, Mr. Biden's action is tied to the federal government. Loans owed to private lenders are different. Mr. Biden's reach likely won't extend much further. Theoretically, he could attempt to have the government wipe out the balance sheets of select private lenders, thus erasing the debt borrowers owe to those individual lenders. But that's not something that he announced, offered or even seriously suggested. With this in mind, private student loan borrowers looking to cut costs should instead look to refinancing as the next best thing. You can get started by comparing student loan refinance offers today. Refinancing may not be as big of a boost as forgiveness but it will help borrowers. Private student loan forgiveness alternatives
Still not sure if these options are the best for your private student loan? Crunch the numbers and see if refinancing is best for you. You can get the process started right now. Other student loan forgiveness plansIf you're steadfastly committed to clean forgiveness for your loans, though, you can potentially qualify for other forgiveness plans. Depending on your personal financial situation, your career or your military background, you may be eligible for other student loan forgiveness programs. Specifically, you may apply for:
There are also some other steps that, while not as helpful as forgiveness, can potentially still help private student loan borrowers. Is there student loan forgiveness for private loans?Although it's highly unlikely that private student loans will be included in any government forgiveness plan, there are still some options you can explore to pay off your loans faster or make your monthly bill more manageable.
What loans will qualify for student loan forgiveness?Nearly every type of federal student loan qualifies for forgiveness, including direct subsidized or unsubsidized loans and graduate or parent PLUS loans. If your loans qualified for the federal student loan payment pause, they're eligible for this forgiveness opportunity.
Are private student loans considered federal loans?Generally, there are two types of student loans—federal and private. Federal student loans and federal parent loans: These loans are funded by the federal government. Private student loans: These loans are nonfederal loans, made by a lender such as a bank, credit union, state agency, or a school.
How do I get rid of private student loans?One of the few ways to get rid of private student debt is through discharge bankruptcy. It's an arduous — and expensive — process. You'll have to file Chapter 7 or Chapter 13 bankruptcy, then file an additional lawsuit known as an adversary proceeding.
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