Biden launches inquiry to fix failed college debt forgiveness program: What to do if you don't qualify
Here's what you can do if you don't qualify for the Public Service Loan Forgiveness (PSLF) program or Temporary Expanded PSLF. (iStock)
The Public Service Loan Forgiveness (PSLF) program was launched in 2007 as a way to repay public servants like teachers, nurses and firefighters by canceling a portion of their student debt. But just 2% of PSLF applications were approved as of April 2021, leaving the vast majority of applicants on the hook for their student loans.
As a way to determine why the program isn't functioning as it was supposed to, the U.S. Department of Education under President Joe Biden's administration announced Friday that it's initiating a formal inquiry, asking PSLF applicants to share their experiences.
"We want to hear from the people who rely on this program about what is working and, more importantly, what isn’t working. We want to hear from experts across the nation about the challenges public service workers face and their ideas about how the PSLF Program can work better."
While the Department of Education decides how to fix program eligibility, PSLF hopefuls are still responsible for making payments on their federal student loans once the federal forbearance period ends this October. And since private student loans aren't protected by the federal moratorium or PSLF, public servants with private education loans need to determine the best way to handle those, too.
Keep reading to learn more about what to do with your student loan debt, including alternative student loan forgiveness programs and even student loan refinancing. If you're considering taking out private student loans or refinancing your current loans, visit Credible to learn more about your options.
HOW TO RECERTIFY YOUR STUDENT LOAN INCOME-DRIVEN REPAYMENT PLAN
3 things to do if you don't qualify for PSLF
The PSLF and Temporary Expanded Public Service Loan Forgiveness (TEPSLF) programs allow full-time professionals with careers in public service to have the remaining balance of their student loan debt erased after adhering to a qualifying repayment plan.
With 98% of PSLF applications rejected, due in part to confusion around what constitutes a qualifying employer or qualifying payment, many borrowers may be looking for ways to manage the college debt they expected to be forgiven. Here are a few things public servants can do with their student loans now:
1. Research alternative loan forgiveness programs
Public servants who don't qualify for PSLF should look up student loan forgiveness programs based on their occupation. For example, the Teacher Loan Forgiveness Program offers up to $17,500 worth of loan forgiveness for teachers who work full-time at a low-income school for five years.
IS REFINANCING YOUR PRIVATE STUDENT LOANS WORTH IT?
2. See if you qualify for other federal protection measures
Federal borrowers who are having trouble making their monthly payments could consider applying for federal student loan forbearance. You may be able to suspend your student loan payments for up to 36 months through unemployment deferment or financial hardship deferment, for instance.
3. Refinance your private student loans while interest rates are low
Student loan refinance rates averaged 3.50% on a 10-year fixed-rate loan and 2.90% on a 5-year variable-rate loan, according to Credible data for the week of July 12, 2021. With rates hovering near historic lows, you may be able to refinance to a lower interest rate and save money on your college debt.
It's unwise to refinance your federal student loans, because doing so makes you ineligible for PSLF or other protections like income-driven repayment plans or hardship forbearance. But if you have private student loans, refinancing can make sense. See interest rates from real lenders in the table below, and see your estimated rate without impacting your credit score on Credible.
See how much money student loan refinancing can save you
Student loan refinancing pays off in the form of lower interest rates, typically by either lowering your monthly payments or helping you pay off your student loans faster.
Borrowers can save the most money on their private student loans by refinancing to a shorter repayment term. Student loan holders who refinanced to a shorter-term loan saved nearly $17,000 over the life of the loan, according to a Credible analysis, all while shaving years off their student loans.
On the other hand, those who switched to a longer repayment term were able to cut their monthly payments by more than $250 on average. This can give borrowers the chance to stay current on their student loans or even pay off other types of debts faster.
Student loan refinancing isn't right for everyone, including federal student loan borrowers. But if you're still on the fence about private student loan refinancing, use Credible's student loan calculator to see your new monthly payment and determine how much money you can save.
THE HIDDEN COSTS OF FEDERAL DIRECT LOANS
Have a finance-related question, but don't know who to ask? Email The Credible Money Expert at moneyexpert@credible.com and your question might be answered by Credible in our Money Expert column.