For some borrowers, student loan forgiveness is their only hope for debt freedom. For other borrowers, loan forgiveness is a pipe dream that only complicates repayment.
This article is for the second group.
In some situations, keeping the dream of forgiveness alive is smart. In others, moving on means saving money.
The Politics of Student Loan Forgiveness for All: Evolving, but Unlikely
Debt cancellation has become a rallying cry from some politicians and many borrowers.
President Biden has even expressed a limited desire to cancel some debt.
There are two significant obstacles to debt cancellation:
- Many politicians are opposed. Republicans are uniformly opposed to forgiveness for all. Some Democrats don’t support the effort.
- Democrats can’t agree on how it should happen. Democrats in the Senate think the President should issue an executive order. President Biden wants Congress to pass legislation.
Ultimately the chances of loan forgiveness in the near future are slim. Waiting for forgiveness based upon the hope of an unlikely event could be expensive.
Thus, borrowers should prepare for a future in which the government doesn’t cancel all of their loans.
The Traditional Advice and Strategy
Many financial experts would say that if forgiveness isn’t going to happen, paying off your loans as quickly as possible is the best approach.
The idea here is pretty simple: The sooner you pay off your loans, the less you spend on interest.
Borrowers opting for an aggressive repayment strategy often choose to refinance their loans at a low interest rate and then pay them off as quickly as they can. This tactic focuses on minimizing spending.
As of December 2024, the following lenders offer the lowest interest rates in a refinance:
| Rank | Lender | Lowest Rate | Sherpa Review |
|---|---|---|---|
| T-1 |  | 4.86% | ELFI Review |
| T-1 |  | 4.86%* | Splash Financial Review |
| 3 |  | 5.29% | Laurel Road Review |
However, a singular focus on eliminating student debt isn’t always the best approach. Giving up on chasing student loan forgiveness doesn’t mean a borrower needs to commit to an aggressive repayment strategy.
Shifting Your Financial Focus
Even if you decide that student loan forgiveness is an unrealistic option, other goals might be a higher priority than student loans.
- High-Interest Credit Card Debt – At the risk of stating the obvious, if you are carrying credit card debt, that should be a high priority item. Given that credit card interest rates usually greatly exceed student loan interst rates, paying off a credit card often comes first.
- Retirement – If student debt is the finanical crisis of the present, retirement is the financial crisis of the future. Some retirement savings opportunities may be higher priority than paying off your student loans.
- Buying a House – For most borrowers, saving up for a down payment on a house is a challenge. Student debt also complicates the mortgage process. Despite the issues caused by student loans, buying a house may be a higher priority than eliminating student debt.
In other words, even if you decide that you don’t have a realistic shot at student loan forgiveness, you don’t have to commit to the traditional aggressive repayment approach.
Borrowers opting to prioritize other financial goals can still benefit from refinancing, but they are usually better off choosing a loan with a longer repayment term to secure a lower monthly payment.
As of December 2024, the following lenders offer the lowest rates on 20-year fixed-rate student loan refinancing:
| Rank | Lender | Lowest Rate | Sherpa Review |
|---|---|---|---|
| 1 | | 6.08%* | Splash Financial Review |
| 2 | | 6.53% | ELFI Review |
| 3 | | 6.55% | Laurel Road Review |
Reminder: Student Loan Forgiveness Isn’t the Only Federal Perk
Moving on from student loan forgiveness doesn’t mean that it is necessarily safe to refinance your federal loans into a private student loan.
The benefit of refinancing to a lower interest rate is obvious, but the risks are less apparent.
Income-Driven Repayment (IDR) is a major consideration before refinancing. All federal loans provide borrowers the opportunity to make payments based on what they can afford. No refinance lender offers such a feature.
If you might be unemployed for an extended period and struggle to find a new job, it might be best to stick with loans that offer income-driven repayment.
The Next Steps for Borrowers Who Won’t Qualify for Student Loan Forgiveness
Before doing anything, it is good to take an inventory of all your student debt. Identify the high-interest debt and the low-interest, lower-priority debt.
If you have private student loans at a high interest rate, explore options to lower the interest rate, including refinancing the loans.
Low-interest private loans and federal student loans don’t necessarily need to be refinanced or modified. Realizing that you can’t qualify for forgiveness is frustrating, but don’t let that frustration lead to a rash financial decision.
