Loan Forgiveness Student Loans: Eligibility Could Be Blocked If You Did This, Check Biden’s New Initiatives

On August 24th Vice President Joe Biden finally unveiled the administration’s long-awaited and (mostly) well-received plan for loan forgiveness. However beyond the framework announced then details are still scant potentially creating a slew of issues and some confusion for borrowers.

A White House fact sheet explains that under the plan most borrowers will be eligible for up to $10,000 in federal student debt relief while Pell Grant recipients will be eligible for up to $20,000 in comfort and the payment pause will be extended “one final time” to December 31.

But now certain student loan providers are providing customers the opportunity to refinance to private loans which might prevent them from gaining debt relief, Insider said adding that this prompted the Consumer Financial Protection Bureau (CFPB) to declare it raises “serious concerns.”

According to Insider several loan companies sent emails to borrowers after Biden’s announcement “breaking down the difference between federal and private student loans and offering its refinancing tool to borrowers that would offer lower interest rates.” While the switch to a private loan may provide some lower interest rates, the refinancing could lead borrowers to miss out on debt cancellation.

As CBS reported, “private student loan forgiveness isn’t impossible, but it’s unlikely. After all, Mr. Biden’s action is tied to the federal government. Loans owed to private lenders are different.” Sources noted that although Biden “could theoretically attempt to have the government wipe out the balance sheets of select private lenders,” he “has not announce offered, or even seriously suggested” such an arrangement.

Insider quoted CFPB Advisor to Director Andrea Matthews as saying, “The benefits of having a federal student loan have never been more tangible with $10,000 to $20,000 in debt relief on the table for most federal student loan borrowers.”  “This raises serious concerns about whether student lenders are pretty representing the tradeoffs of refinancing to a private loan.”

The Department of Education said on its website that an online forum would be available by October. As a stopgap the bureau suggested some actions for debtors to take. First check if you’re eligible. Then ensure you will receive updates by confirming your information on the StudentAid.gov website. In addition verify that your loan servicer has your most current contact information so they can reach you.

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