Calls are growing for President Joe Biden to cancel $50,000 in student loan debt for every federal student loan borrower in the U.S.
That would entirely eliminate the debt burden for 36 million Americans — 84% of all borrowers — now struggling under the weight of their student loans, according to new figures from the U.S. Department of Education.
But Biden has so far resisted delivering any form of widespread relief. If student loans are damaging your finances, waiting for the president’s help may not be as reliable a solution as refinancing your student loan at a lower rate.
Biden's loan forgiveness plan remains a question mark
“America is facing a student loan time bomb that, when it explodes, could throw millions of families over a financial cliff," Massachusetts Sen. Elizabeth Warren warned during a hearing last week. She and other Democrats are urging the president to use executive action to forgive $50,000 in debt per person.
More than half of voters want the same thing, according to a poll from Vox and Data for Progress, and so do more than 400 advocacy groups that sent Biden a letter on Tuesday of last week.
"When borrowers' student debt is canceled, their ability to pay down other debts increases; their geographic mobility and ability to stay in rural communities improves, as do their opportunities to pursue better jobs," the letter says.
President Biden has long said he favors canceling some federal student loan debt for every borrower — but within limits.
"I am prepared to write off the $10,000 debt but not 50 (thousand), because I don't think I have the authority to do it," the president said during a CNN town hall in February. Still, he has asked his education secretary to review the $50,000 question.
Broad student loan forgiveness would give millions of Americans more room in their budgets to pay off other debt, save or start investing.
The case for refinancing your student loans
Some signs suggest the president is whetting his appetite for more widespread student loan forgiveness.
In March, the Biden administration canceled $2.3 billion in student loans for victims of fraudulent for-profit colleges and for borrowers with disabilities. The most recent COVID relief bill that made a third round of $1,400 stimulus checks possible included a huge tax exemption on forgiven student debt.
But Biden’s plan for wiping out student debt is still just that — a plan — and governing through executive orders can be politically risky. Impactful federal student loan relief is still far from guaranteed.
Rather than waiting, you might want to consider refinancing your student debt to a new loan at one of today's record-low student loan interest rates.
Think about the interest paid on a $100,000 student loan. If you originally took on that loan at a 7% interest rate and can refinance to a new loan at 3%, that’s a savings of $4,000 a year on interest payments.
A gamble that may be worth it
The government doesn't offer refinancing on its student loans, so a refi would require you to switch to a private student loan offered by a bank or other private-sector lender.
Making that move would disqualify you from whatever loan forgiveness plan Biden ultimately rolls out — if he decides to do anything at all. That may be a roll of the dice worth taking.
With the country’s economic recovery putting upward pressure on interest rates, student loan rates are likely to rise. If the president fails to provide a significant level of forgiveness, not refinancing your student loans now could mean missing out on an opportunity to save some real money.
If you already have private student loans, you won’t benefit from federal forgiveness measures anyway. If you haven't already refinanced, you'll want to compare rates from multiple lenders and refi your college debt at one of the current low rates.