3 Types of People Who Are Not Covered by Student Loan Forgiveness

  • Unlike federal student loans, private student loans are not eligible for student loan forgiveness.
  • People who have refinanced student loans at a private loan agent are also not eligible for the forgiveness.
  • Under the PSLF program, only people who work for the US government and nonprofit organizations are eligible for forgiveness.
  • This article is part of a series focused on millennial financial empowerment called Master Your Money.

President Biden has forgiven $1.5 billion in student loan debt, according to Forbes, but only 1.5% of borrowers actually benefited from existing student loan forgiveness programs.

As of November 2021, 89% of student borrowers who have just entered the workforce are not financially prepared to start making payments. While the Public Service Loan Forgiveness Program (PSLF) enacted in 2007 looks promising, the Biden administration is still under pressure to provide large-scale student loan forgiveness that includes as many Americans as possible.

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

1. People who work for private companies

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

This means that people who work in the private sector are currently excluded from the PSLF. An easy way to tell if the company you work for is private or non-profit is to look for the letters after the company name. Suffixes such as LLC, Inc., Corp. or S-Corp are private organizations, while 501(c)(3) refers to non-profit organizations.

2. People with private student loan services

Unlike subsidized or unsubsidized federal student loans, private student loans are not covered by student loan forgiveness programs.

On January 13, private loan manager Navient settled a $1.85 billion lawsuit brought by 39 attorneys general over predatory loan claims. While only 416,000 borrowers are eligible for loan forgiveness and restitution, Navient’s settlement sets a promising precedent for students seeking loan forgiveness.

“Ironically, there are more undergraduates than graduate degree holders who are not eligible for loan forgiveness because graduate degree debt is unlimited while undergraduate is strictly capped,” says a student loan expert. Travis Hornby, CFA.

This stipulation 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 borrowing limits are $5,500 in year one, $6,500 in year two, and $7,500 in year three and beyond. Independent students whose parents do not support them are generally entitled to the full amount, but dependent borrowers are entitled to different amounts depending on their parents’ income.

Graduate borrowers, however, are eligible for more federal student loans that are more likely to be forgiven in the future.

3. People who refinanced their student loans

Refinancing your student loans can make it easier to manage monthly payments and lower your interest rates, but it can also cost you significant borrower protections. Since you cannot refinance your student loans with a federal agent, you will need to obtain a private loan that will not be covered by student loan forgiveness. You may also lose access to COVID-19 interest-free forbearance and PSLF if you refinance your student loans.


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