What if Biden never cancels your student loan debt? You have an option
President Joe Biden has long expressed his commitment to helping Americans burdened with student loan debt. He extended a hiatus on federal student loan payments until September 30, recently canceled more than $ 2 billion in student loans, and said he wanted to write off $ 10,000 in student debt for every borrower.
Democratic lawmakers are pushing him to eliminate up to $ 50,000 per person. But when – and if – general relief will actually occur, it’s anyone’s guess.
If you are burdened with college debt, you can wait and hope that Biden will be successful. Or, there is another option: refinance your student loans to take advantage the lowest refi rates of the moment.
Student loan forgiveness remains a big question
A large forgiveness of student loans would give millions of Americans more room in their budgets to pay off other debt, save or start investing.
Biden has said since the campaign he was in favor of canceling a federal student loan debt for every borrower, but at a CNN town hall in early February he expressed doubts that he could go as far as some members of Congress would like.
“I am ready to write off the debt of $ 10,000 but not 50 (thousand), because I don’t think I have the power to do it”, the president said.
Democrats, including Senate Majority Leader Chuck Schumer and Massachusetts Senator Elizabeth Warren, have pushed for up to $ 50,000 in pardon.
Schumer got this message for Biden: “You don’t need Congress; all you need is a stroke of the pen.” Stepping up the pressure, the New York Democrat said in mid-March that the Justice Department was addressing the issue of authority.
But the president also asked his education secretary to investigate the matter. Despite this, Biden is currently working on other priorities – namely a $ 2 trillion infrastructure plan.
The case of refinancing your student loans
There are signs that the ground is being laid for widespread student loan forgiveness.
In the space of about 10 days, the Biden administration recently canceled $ 2.3 billion in student loans for some borrowers, and the COVID relief law is now paying those loans. third, stimulus checks of $ 1,400 includes a huge tax exemption on canceled student debt.
But Biden’s plan to reduce student debt is still just that – a plan – and governing through executive orders can be risky, politically. Federal student loan relief is therefore not exactly guaranteed.
Instead of waiting, you might want to consider refinance your student loans at record interest rates.
Think about the interest paid on a $ 100,000 student loan. If a borrower initially took out this loan at an interest rate of 7% and then refinanced it into a new loan at 3%, that represents a savings of $ 4,000 per year on interest payments.
A bet that may be worth it
Since the government does not offer refinancing on its loans, renewing a federal loan involves switching to a private student loan offered by a bank or other private sector lender.
This would disqualify you from any federal government loan forgiveness. But it may be a gamble worth taking.
With the economy on the road to recovery, interest rates are under pressure – so student loan rates are likely to rise.
By waiting for presidential action that may not materialize and not refinancing your student loans now, you may be missing out on a real money-saving opportunity.
Note that if you already have private student loans, you will not benefit from any federal remission. So if you haven’t already, you’ll want to compare the rates of several lenders and refinance your university debt at one of the lowest rates available today.