Get relief if you don’t qualify for Navient Student Loan Forgiveness
For years, many student borrowers have suffered under the weight of excessive debt.
Some 66,000 borrowers finally got relief when the recent Navient settlement cleared their balances. (Here’s how to tell if you’re one of them.)
Millions more may never experience this type of debt forgiveness.
Although federal student loan borrowers have the option to suspend their interest-free monthly bills until May 1, larger-scale federal student loan forgiveness appears less likely as it has been excluded from Democrats’ Build Back Better program. .
There are, however, other ways to take a break, although they may have a catch.
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For starters, borrowers can take advantage of the payment break, for now, and consider consolidating or refinancing their current loans.
If you have several different loans, consolidating could help streamline and simplify your payment into one monthly bill.
You can also choose to extend terms beyond the standard 10 years to lower your monthly payments. However, if you extend the term of the loan, you will ultimately pay more interest on the balance.
However, if you are on an income-driven repayment plan or have made payments for the cancellation of government loans, consolidating your current loans could cause you to lose credit to those programs.
The Biden administration has relaxed the rules around public service loan forgiveness with a limited waiver, meaning some of your past payments can now count towards loan forgiveness. This temporary waiver entitles more borrowers to cancellation, but must be completed by October 31, 2022.
Alternatively, you could refinance your student loans at a lower interest rate to reduce your debt load.
“If you have private loans, there should be nothing stopping you from refinancing if you find a lower rate,” said higher education expert Mark Kantrowitz. “You just want to be careful not to refinance to a floating rate because those have no choice but to go up,” he added.
Private loans can be fixed or have a variable rate linked to Libor, prime rates or Treasury bill rates, which means that when the Federal Reserve starts raising rates from virtually zero, borrowers with loans private will pay more interest, although how much more will vary depending on the reference and the terms of the loan.
“With the Fed about to raise rates, you definitely want to stay in a fixed rate loan,” said Mary Jo Terry, managing partner at Yrefy, a private student loan refinance company.
You also need to be careful not to refinance a federal loan into a private loan, which would mean losing any federal loan forgiveness — if it’s ultimately enacted by Congress.
Refinancing into a private loan also waives the safety nets that come with a federal loan, including income-based repayment programs, for those who would qualify.
To see if this applies, go to the Department of Education’s Central Student Aid Database to check the terms of your loans and any federal programs available to you.
There’s even a loan calculator, which helps you calculate student loan repayments and choose the best repayment option.
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