3 reasons your student loans probably won’t be forgiven

Your income, student loan balance, and federal law could all prevent your student loans from being forgiven

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Student loan forgiveness has been proposed by political candidates for several years. Here’s why your student loans may not be forgiven. (Shutterstock)

Over the past several years, many political candidates have included either full or partial student loan forgiveness as part of their platforms. As a result, many borrowers have been anxiously waiting for an announcement as to whether any of the student loan forgiveness proposals will become a reality.

With the federal student loan payment pause set to expire on Aug. 31, 2022, you may be especially eager for loan forgiveness.

But even if broad-scale forgiveness happens, there’s no guarantee your loans will be included. In fact, your student loans may not be forgiven for multiple reasons.

Before that happens, you can learn more about student loan refinancing and compare rates from multiple private student loan lenders by visiting Credible.

You have more than $50,000 in loans

Most of the student loan forgiveness proposals introduced have capped forgiveness at a certain amount of debt per borrower. President Joe Biden has proposed forgiving up to $10,000 of federal student loan debt per borrower, while other proposals would cover up to $50,000 per borrower.

If student loan forgiveness becomes a reality, it’s unlikely it would cover the full amount of debt for federal student loan borrowers. As a result, if you have more than $50,000 of student loan debt — or more than $10,000 if Biden’s proposal wins — you’ll likely still have to pay off what remains.


Your income is too high to qualify for student loan forgiveness

If federal student loan forgiveness is offered, it’s likely to include an income cap, meaning high-income borrowers — even those with large amounts of debt relative to their income — probably won’t qualify.

The income limits on loan forgiveness vary from one proposal to the next. Media reports have stated that the Biden administration is considering student loan forgiveness only for borrowers with an income of $125,000 to $150,000 for single filers or $250,000 to $300,000 for married filers.

The income limits could be even lower if student loan forgiveness is ultimately offered. When the federal government offered economic impact payments, they were only available to individuals with an income of up to $75,000 for single filers and $150,000 for married filers. 

It’s important to note that some borrowers already qualify for student loan forgiveness through an existing program, including the Public Service Loan Forgiveness Program. If you work in public service, it’s worth looking into whether you qualify for loan forgiveness.

You can easily compare prequalified rates from multiple lenders using Credible.

President Biden can’t cancel all student loans

Since it appears unlikely the current Congress will pass student loan forgiveness, it would require an executive action by President Biden. However, there’s been some debate as to whether the president actually has the power to cancel some or all student loan debt.

Some Congressional leaders, including Senate Majority Leader Chuck Schumer and Sen. Elizabeth Warren, have stated that the president has the power to cancel student loan debt. House Speaker Nancy Pelosi, on the other hand, has said the power to cancel student loans lies solely with Congress.

Proposals have also been introduced in Congress that would end the current student loan pause and prevent the president from canceling student loan debt.

Ultimately, while it’s possible President Biden will move forward with limited student loan forgiveness, it seems unlikely he has the authority to cancel all federal student loans. And since private lenders make private student loans, government student loan forgiveness wouldn’t apply to private student loans.


What to do while the CARES Act is still in effect

Whether President Biden will forgive some student loan debt is still yet to be decided. In the meantime, borrowers should plan to start making their loan payments as normal when the payment pause ends on Aug. 31.

Here’s what steps you can take before payments resume:

  • Take inventory of your current loan situation. Chances are, like most borrowers, you haven’t looked at them in more than two years. Take note of how much debt you still have and what your monthly payments and interest rate will be.
  • Revisit your budget. You may want to see how your student loan payments will fit into your budget. Start setting aside your monthly payment amount now, so you know you can afford it once payments kick back in.

If you won’t be able to afford your payments once they resume, you have a couple of options. 

First, if you’re facing financial hardship, forbearance will still be available for federal student loans. Contact your loan servicer as soon as possible if you’ll need additional forbearance.

Another option if you can’t afford your loan payments is to refinance your loans through a private lender to get a lower interest rate. However, if you currently have federal loans, proceed with caution before refinancing them into a private loan. Once you do this, you won’t be eligible for loan forgiveness and won’t have access to many of the protections federal student loans offer.

To get started on refinancing your student loans, visit Credible and compare prequalified rates from multiple lenders.