3 Types of People Who Aren't Covered by Student Loan Forgiveness – Business Insider


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President Biden has cancelled $1.5 billion worth of student loan debt, according to Forbes, but only 1.5% of borrowers have actually benefitted from existing student loan forgiveness programs.
As of November 2021, 89% of student-loan borrowers who have just entered the workforce are financially unprepared 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 wide-scale student loan forgiveness that includes as many Americans as possible.
Here are three types of people whose student loans aren’t currently covered under existing student loan forgiveness programs.
Daniel Rodriguez, AIF, COO of Hill Wealth Strategies, says that only borrowers who work full-time for a US  federal, state, local, or tribal government, or non-profit organization are covered under the Public Service Loan Forgiveness Program after 120 consecutive payments.
This means people who work in the private sector are currently excluded from PSLF. One easy way to tell if the company you work for is private or non-profit is to look for letters after the company’s name. Suffixes like LLC, Inc., Corp., or S-Corp are private organizations, while 501(c)(3) refers to non-profit organizations.
Unlike federal subsidized or unsubsidized student loans, private student loans are not covered under student loan forgiveness programs.
On January 13, private loan servicer Navient settled a $1.85 billion lawsuit filed by 39 attorney generals for predatory lending claims. While only 416,000 borrowers are eligible for loan forgiveness and restitution as a result, Navient’s settlement is a hopeful precedent for students who want to get their loans forgiven.
“Ironically, there are more undergraduates than graduate-degree holders that do not qualify for loan forgiveness because graduate degree debt is unlimited while undergraduate debt has strict caps,” says student loan expert Travis Hornsby, 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 during the first year, $6,500 in the second year, and $7,500 during the third year and beyond. Independent students whose parents don’t support them usually qualify for the whole amount, but dependent borrowers qualify for different amounts based on their parents’ income.
Graduate borrowers, however, are eligible for more federal student loans that are more likely to be forgiven in the future.
Refinancing your student loans may make monthly payments more manageable and lower your interest rates, but it can also cost you important borrower protections. Because you cannot refinance your student loans with a federal servicer, you’ll have to get a private loan that won’t be covered under 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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