4 ways to pay off remaining student loan debt after forgiveness

If you have remaining balances after student loan forgiveness, here’s how to pay off student loans faster. (Shutterstock)

If you qualify for the recently announced $10,000 to $20,000 in student loan forgiveness, now is a good time to think about paying off any remaining balances faster. Interest on federal student loans remains at 0% until the end of the year, meaning any payments you continue to make go toward the principal of any balance you’ll have after forgiveness.

Paying off your student loan debt sooner can help you make progress toward your overall financial goals. With your federal student loan debt paid off, you could put that money toward paying down private student loan balances, saving for a down payment on a house, home renovations, or investing. 

Visit Credible to learn more about student loan refinancing and compare rates from multiple private student loan lenders.

Here’s how you can pay off your student debt after forgiveness:

• If you’re getting forgiveness, will you still have to pay?
• Keep paying through the federal payment pause
• Pay extra
• Pay bi-weekly
• Consider refinancing

If you’re getting forgiveness, will you still have to pay?

Yes, especially if you still have remaining debt after the $10,000 or $20,000 of student loan debt is forgiven. Also, not everyone will qualify for forgiveness. 

The Biden administration laid out several key points about student loan forgiveness and who qualifies for each amount. The U.S. Department of Education will provide up to $10,000 in debt relief to non-Pell Grant recipients and $20,000 to those who received a Pell Grant. You’re eligible for this relief if you meet these income requirements:

• Under $125,000 for individuals
• Under $250,000 for households

Even if you qualify, it’s possible that the forgiveness won’t wipe out your entire federal loan balance. The forgiveness plan also doesn’t apply to private student loans. If you have both federal and private loans, you’ll still have to keep paying on your private loans even if your federal loans are completely forgiven.

Here are some strategies to help you pay off your loans faster.

BIDEN’S STUDENT LOAN FORGIVENESS PLAN — HERE’S EVERYTHING YOU NEED TO KNOW

1. Keep paying through the federal payment pause

Even though you don’t have to make any payments toward your student loans until after Dec. 31, 2022, it’s still a good idea to pay toward your balance monthly if you’re able. The U.S. Department of Education set the interest rate at 0%, so any payments you make now will help pay down your principal. 

The 0% interest rate works in your favor even if it’s just for a few months. The more you put down, the more likely you’ll have a lower payment when the pause ends. With a lower monthly payment, you can apply the extra money to other financial goals. 

2. Pay extra

During the payment pause, borrowers who were able to build up their savings should possibly consider whether it's worth tapping into those funds and making extra payments on their loans. If you have both federal and private loans, you can put the money you’re saving on federal loans toward paying more on your private ones. 

For example, if you meet the income qualifications and have $10,000 in federal student loans and $5,000 in private student loans, forgiveness will wipe out your federal student loan debt. You can now direct any money that you would’ve applied toward federal student loan payments to help pay down your remaining $5,000 private student loan debt.

HERE’S WHO HAS QUALIFIED FOR STUDENT LOAN FORGIVENESS UNDER BIDEN

3. Pay bi-weekly

When you pay bi-weekly, you divide your required monthly payment amount in half and pay that sum in two payments every two weeks. This may not sound like it will do much, but you’ll actually end the year having made an extra full payment. In the long run, this can help you pay down your balances faster, especially if you have a lot of debt to pay off.

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

4. Consider refinancing

Refinancing can be a way to get a lower interest rate. And if you choose a shorter repayment term, you can pay off your student debt faster.

To refinance, you take out a new private student loan to pay off multiple existing loans. You can combine multiple private student loans and federal loans through refinancing.

But before you refinance, it’s important to understand the pros and cons.

Pros of refinancing  

• If you choose a shorter repayment term, you’ll have less total interest costs over the life of the loan.
• Choosing a longer repayment term could lower your monthly payment.
• Refinancing gives you just one monthly payment to keep track of, rather than multiple payments.

Cons of refinancing

• A shorter repayment term means you’ll have larger monthly payments.
• A longer repayment term means you’ll pay more interest over the life of the loan.
• If you refinance federal loans with a private student loan, you’ll lose access to benefits that come with loans held by the U.S. Department of Education, such as income-driven repayment plans, forbearance, and loan forgiveness.

LEFT OUT OF STUDENT LOAN FORGIVENESS? WHAT TO DO ABOUT PRIVATE STUDENT LOANS

How to refinance student loans

If you’ve decided refinancing is the right option to help you pay off student loans faster, here’s how to get started: 

1. Research and compare lenders. Compare as many options as possible so you can find the right loan for you. Consider interest rates, fees, repayment terms, and any eligibility requirements.
2. Pick your loan option. You might choose a shorter repayment term with a higher monthly payment or a longer repayment term with a lower interest rate and lower payments. Choose the best fit for your situation.
3. Complete an application. Most lenders allow you to complete an application online, so be sure to have all the required documentation on hand when you begin the application process. Consult the lender’s website to see how long the approval process takes.
4. Keep paying your current loans. Even though you’re refinancing, you can’t neglect your current loans until you get approval. Continue making payments on your loans and once you’re approved, check to make sure your old loans have been paid off.
5. Begin making payments on your new loans. Now that you’ve refinanced your student loans, stick to your new repayment term and make your monthly payments in full and on time to help you get closer to paying off your student loan debt.

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