I refinanced my student loans into a mortgage — can I still get them forgiven?

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The Credible Money Coach answers homeowner’s student loan relief questions. (Credible)

Dear Credible Money Coach,

We obtained a $100,000 mortgage on our home to pay off student loans. Can we get the remainder of the mortgage forgiven under this new federal program to pay off student loans? — Shamus

Hi Shamus, and thanks for your question. Student loan forgiveness was headline-grabbing news for much of 2021. Unless the current forbearance program gets another extension, it will end on May 1 of this year, when millions will have to resume federal student loan payments.

To answer your question, let’s clarify a few points about student loan forgiveness, who’s eligible for it and what happens when you refinance federal student loans.

No ‘new’ federal forgiveness program

You mention a "new federal program to pay off student loans." While there’s been talk of forgiving $10,000 or even $50,000 of federal student loans per borrower, it’s just chatter right now. It’s not likely that we’ll see broad loan forgiveness any time soon, if at all.

What to know about Public Service Loan Forgiveness

Some federal student loan borrowers qualify for the Public Service Loan Forgiveness (PSLF) program, based on their employment. The PSLF program allows certain borrowers with federal Direct Loans to have the remaining balances forgiven after making 120 monthly payments. You must be working full-time for a qualifying employer in a qualifying job in service to the public. That includes military, government employees, teachers, public hospital workers, certain nonprofit workers and more.

Historically, qualifying for forgiveness under the PSLF program has been complicated and confusing to navigate. In 2021, the federal government took the following steps to improve forgiveness and make it accessible to more borrowers:

  • Expanding the types of federal loans that qualify for forgiveness
  • Allowing military and government employees to count forbearance months in their 120-payment requirement
  • Reviewing and reconsidering previously denied PSLF applicants
  • Making it easier to apply for PSLF
  • Simplifying the rules for qualifying payments

The answer to your question

To qualify for the PSLF program, you must have a qualifying federal student loan. Other types of debt — including private student loans, personal loans, credit cards and mortgages — don’t qualify. That’s because the federal government only has the power to forgive federal student loans.

Even if your original student loans were federal loans that would have qualified for PSLF, you lost their benefits by refinancing them into a mortgage. 

That doesn’t mean that paying off your student loans with a mortgage was the wrong decision. If you could refinance your mortgage for a lower rate than your original mortgage or student loans, you may have saved a significant amount of interest. Also, you may have improved your cash flow by eliminating a monthly payment. 

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About the author: Laura Adams is a personal finance and small business expert, award-winning author, and host of Money Girl, a top-rated weekly audio podcast and blog. She’s frequently quoted in the national media, and millions of readers and listeners benefit from her practical financial advice. Laura’s mission is to empower consumers to live richer lives through her speaking, spokesperson, and advocacy work. She received an MBA from the University of Florida and lives in Vero Beach, Florida. Follow her on LauraDAdams.com, Instagram, Facebook, Twitter, and LinkedIn.