During his presidential campaign, Joe Biden called for Congress to cancel up to $10,000 worth of student loan debt per borrower. Senate Democrats have called on the President to forgive federal student debt through an executive order, but Biden would rather have Congress come together to enact legislation rather than lean on his presidential authority.
The prospects for student loan forgiveness became even murkier when Biden left out college debt relief in his most recent federal budget proposal released last week. The $6 trillion budget, released on Friday, outlined his plan to rebuild America's infrastructure. It focuses on funding affordable housing, education, and health care.
However, with no plan for canceling student loan debt in sight, now may be the time to start paying down or refinancing your student loans.
How to deal with your college debt depends on the type of loans you have: federal or private. Read the case for what to do with each below, and if you decide that refinancing is best for you, make sure you get the lowest interest rate possible by shopping around on an online loan marketplace like Credible.
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What to do if you have federal student loans
Federal student loans are currently in forbearance, which means certain borrowers aren't required to make payments, and interest does not accrue during this time. Some college graduates have been holding off on making extra payments with the hope that part or all of their student loan debt would be forgiven.
This forbearance period expires on Jan 31, 2022, though, and if you have federal student loans, you have a few options for what to do with the extra cash before payments resume:
- Keep making payments on your loans. Since interest doesn't accrue during the forbearance period, your student loan payment would go toward the principal of your loan. This can help you pay down your debt faster and save you money on interest in the long run.
- Use the extra money to pay off other debts. If you carry high-interest credit card debt, for example, you could put your student loan payments toward paying down that balance. This could provide a faster, more lucrative avenue for saving on interest.
- Save the money for future payments. You can put the money from your student loan payments aside, so you have a cushion when payments resume in February.
It's not recommended that you refinance your federal student loans privately because you could lose government protections and ruin your chances of potentially qualifying for federal student loan forgiveness in the future.
If you're not sure about the type of loans you have, get in touch with an experienced loan officer at Credible to learn more.
What to do with private student loans
College graduates who have private student loans don't qualify for the current moratorium, and they wouldn't likely be affected by any student loan forgiveness on the federal level.
But that doesn't mean there's nothing you can do with your student loans right now. Private student loan holders should consider refinancing while interest rates are low.
Fixed-rate student loan refinancing rates keep setting record lows. Refinancing your student loans to a better rate could save you thousands of dollars over the life of your loan. Borrowers who refinanced to a shorter-term loan on Credible saved an average of $17,344.
Still not sure if student loan refinancing is right for you? Utilize a student loan refinancing calculator to see if it's worthwhile. If so, compare student loan refi rates among multiple lenders on Credible.
This article was originally published on Fox Business.
