3 Types of people still not covered by student loan forgiveness



President Biden has forgiven $1.5 billion worth of student loan debt according to Forbesbut only 1.5% of borrowers have actually benefited from existing student loan forgiveness programs.

As of November 2021, 89% of student loan borrowers just entering the workforce are not financially ready to start making payments. While the Public Service Loan Forgiveness (PSLF) program signed into law in 2007 seems promising, the Biden administration is still under pressure to provide broad-based student loan forgiveness that covers as many Americans as possible.

Here are three types of people whose student loans are not currently covered by existing student loan forgiveness programs.

1. Persons working for privately owned companies

Daniel Rodriguez, AIF, COO of Hill-Wealth Strategiessays only borrowers who work full-time for a U.S. federal, state, local or tribal government or a nonprofit organization are eligible under the Public Service Loan Forgiveness Program after making 120 consecutive payments.

This means that people who work in the private sector are currently excluded from PSLF. A simple way to determine if the company you work for is private or non-profit is to search by letter for the name of the company. Suffixes like LLC, Inc., Corp. or S-Corp are private organizations, while 501(c)(3) refers to nonprofit organizations.

2. Individuals with private student loan service providers

Unlike government-subsidized or unsubsidized student loans, private student loans do not fall under student loan forgiveness programs.

On 13. January, private loan servicer Navient settled a $1.85 billion lawsuit filed by 39 state attorneys general over predatory lending claims. While only 416.000 borrowers are entitled to loan forgiveness and restitution, Navient's settlement is a hopeful precedent for students who want their loans forgiven.

"Ironically, there are more students than graduates who don't qualify for loan forgiveness because graduate debt is unlimited, while undergraduate debt has strict caps," says student loan expert Travis HornbyCFA.

This provision means that undergraduate borrowers are more likely to take out private loans for the portion of tuition not covered by federal student loans. According to studentaid.gov, federal loan limits for the first year are 5.500 USD, in the second year at 6.500 USD and in the third year and beyond at 7.500 USD. Independent students whose parents do not support them are usually eligible for the full amount, but dependent borrowers are eligible for different amounts depending on their parents' income.

Borrowers with college degrees, however, are eligible for more federal student loans, which are more likely to be made in the future.

3. Individuals who refinanced their student loans

Refinancing your student loans can make monthly payments more manageable and lower your interest rates, but it can also cost you important borrower protections. Since you can't refinance your student loans with a federal servicer, you'll need to get a private loan that doesn't fall under student loan forgiveness. You can also lose access to COVID-19 interest free forbearance and PSLF when you refinance your student loans.

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