Can Refinanced Student Loans Be Forgiven?

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Stanley Tate

#1 Student Loan Lawyer

Updated on July 15, 2022

Private lenders rarely forgive refinanced student loans, but some will if the borrower or co-signer suffers a physical or mental disability and can no longer work.

When you refinance federal student loans, you may gain a lower interest rate and save money, but you’ll lose access to benefits like income-driven repayment and forgiveness programs. Many private lenders don’t forgive refinanced student loans under any circumstances. But a handful of companies will release the borrower or a co-signer from the loan if either becomes disabled and unable to work.

Many Americans are waiting to see if President Biden honors his campaign promise and forgives $10 thousand in student loan debt per borrower. Although the White House has dropped hints about the possibility of broad cancellation in the last few months, Biden has yet to use his executive authority to erase loans or persuade Congress to pass a bill to cancel student debt.

Ahead, learn whether refinanced student loans will be forgiven if the Biden administration moves forward with blanket student loan cancellation.

Learn More: Who Qualifies for Student Loan Forgiveness

Will student loan forgiveness include refinanced loans?

It’s unlikely that refinanced student loans will be forgiven if the Biden administration approves widespread cancellation. Throughout the pandemic, the federal government has implemented piecemeal fixes that have wiped out loans for public servants, military service members, disabled persons, and people who attended sham for-profit colleges. It’s also kept most federal student loan borrowers in forbearance.

None of those benefits have helped borrowers who struggle to pay private student loans. This relief has been limited to federal student loans: This is because the Education Department has the authority* to write off these loans thanks to laws that govern the federal student aid system.

Private loans are made outside of that system. These loans are instead made by banks, credit unions, online lenders (and so on) and are instead controlled by individual student loan promissory notes. Basically, unless Congress passes a law authorizing it, the government can’t make many changes to that private contractual relationship.

Simply put, sweeping student debt relief probably won’t include refinanced loans.

Learn More: Private Student Loan Forgiveness

The Higher Education Act of 1965 gives the Secretary of Education the power to “enforce, pay, compromise, waive, or release any right” to collect on federal student loans. That power doesn’t extend to private loans.

Alternatives if you don’t qualify for student loan forgiveness

Since forgiveness is off the table for refinanced student loans, it makes sense to explore alternative repayment strategies. Here are six moves to consider:

  • See if your employer offers student loan repayment assistance programs. Some companies offer a matching benefit to help pay down your student loan balance. If you’re hunting for a new job, look for employers providing this benefit.

  • Consolidate your federal student loans to free up income. Student loan consolidation can put your payments on hold if you’ve had to pay your federal loans during the pandemic. The new Direct Consolidation Loan may qualify you for various forgiveness opportunities that the U.S. Department of Education has introduced, including the Public Service Loan Forgiveness Program and income-driven repayment plan forgiveness. Read more about the PSLF Waiver and IDR account adjustment.

  • Refinance your loans. Student loan refinancing rates have hit near record lows as the pause on student loan payments has dragged on. Depending on your credit score and personal finances, you may be able to lock in a better fixed or variable rate on your loans, which can help lower monthly payments and the total interest you pay. Use a loan marketplace like Credible to compare lenders and loan terms and find the lowest rates. Read more about how many times you can refinance student loans.

  • Ask your lender for different repayment options. If you’re struggling to keep up with your payments, ask your loan servicer for options to temporarily suspend payments with deferment, reduce your interest rate, or extend your repayment term. Read more about ways to lower student loan payments.

  • Negotiate a settlement. If you can’t repay your loans, you may be able to settle for less than the current loan amount. Keep in mind that lenders won’t accept a settlement offer until you fall behind on payments. If that happens, the late payments will be added to your credit history, and collection costs will be tacked onto the balance. Read more about settling student loan debt.

  • File student loan bankruptcy. The path to discharging student loans in bankruptcy might be expensive and filled with challenging standards that are hard to overcome. But suppose you can’t refinance a second time for a lower rate and payments or afford a settlement. In that case, bankruptcy may be your only option to get out from under the loan. Read more about private student loan bankruptcy discharge.

Bottom Line

The White House has frozen federal student loan payments since the start of the coronavirus pandemic. It has also canceled over $25 billion in student debt in the past two years. Unfortunately, none of those protections and federal benefits have helped borrowers saddled with private student loans.

I expect the same will be true if President Biden uses his executive authority to wipe out thousands of dollars of student loan debt for millions of people.

Refinanced student loans likely won’t qualify for forgiveness.

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