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Can You Get Student Loan Forgiveness if You Refinance?

Can You Get Student Loan Forgiveness if You Refinance?
Sulaiman Abdur-Rahman
Sulaiman Abdur-RahmanUpdated November 19, 2024
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March 2025: The Saving on a Valuable Education (SAVE) Plan for federal student loan repayment is on hold due to a court injunction. As of late March, these loan repayment plans are available: Income-Based Repayment, Pay As You Earn, and Income-Contingent Repayment. Federal student loan consolidation applications are also live. To monitor the latest decisions on federal student loan plans, check the Federal Student Aid site.
Loans that have been refinanced are not eligible for federal debt relief programs, including Public Service Loan Forgiveness (PSLF). If you refinance student debt with a private lender, you borrow a private education loan that cannot qualify for PSLF or federal income-driven repayment (IDR) options.Refinancing may not be right for you if you’re eligible for federal student loan forgiveness through federal IDR plans. With these plans, outstanding balances at the end of your repayment period may be forgiven or canceled. Also you can only apply for income-driven payment programs if you are paying a federal student loan.Below we describe how student loan forgiveness works and highlight why you won’t get federal student loan forgiveness if you refinance.

What Is Student Loan Forgiveness?

Student loan forgiveness is when your loan servicer cancels some or all of your debt on an education loan. Another form of student loan forgiveness is when you receive loan repayment assistance from a private entity or state-based program. Some forms of student loan forgiveness may be considered taxable income at the state or federal level.Federal student loan borrowers may have access to federal repayment plans or service programs that can lead to student loan forgiveness. Educators who teach in a low-income school, for example, may be eligible for up to $17,500 in federal student loan forgiveness under the Teacher Loan Forgiveness program.Public employees with federal student loan obligations may have access to the Public Service Loan Forgiveness program. The PSLF program can forgive the remaining balance on your federal student loans after you have made 120 qualifying monthly repayments as a public employee.Lenders of private student loans may reach a debt settlement agreement with delinquent borrowers. Debt settlement may involve some amount of loan forgiveness, which may be considered taxable income. Private lenders generally have no obligation to offer debt forgiveness on private student loans.Federal and private student loans, including refinanced student loans, may be eligible for student loan forgiveness at the state level.Recommended: Guide to State-Based Student Loan Forgiveness Programs

What Is Student Loan Refinancing?

Student loan refinancing is an action that prepays your existing student debt and leaves you with a new education loan issued by a private lender. Refinancing is likely not right for you if you’re eligible for student loan forgiveness. How student loan refinancing works is that borrowers submit an application with a private lender requesting a new loan agreement for refinancing student loan debt.Refinancing federal student loans can allow borrowers to replace their existing federal loans with the terms and conditions of a private loan agreement. Private lenders can set their own underwriting standards, but some may require applicants to have steady income and good credit. For subprime borrowers, it might be difficult to refinance student loans with bad credit.Reviewing the pros and cons of refinancing can help you decide whether refinancing is right for you. One of the advantages of refinancing student loans is it may provide you with a lower monthly payment. But refinancing for a lower monthly payment may cause you to pay more interest over the life of your private loan.Another disadvantage of refinancing federal student loans with a private lender is you’ll be forfeiting federal benefits on the amount you refinance, including eligibility for PSLF, Teacher Loan Forgiveness, or federal IDR options.

Does Refinancing Disqualify You From Loan Forgiveness?

If you refinance your student loans with a private lender and afterwards find yourself unable to repay the debt, you may ask the private lender for relief. There are no programs to apply for as with federal forgiveness, but it is possible you can work something out.As mentioned earlier, private lenders may reach a debt settlement agreement with delinquent borrowers. Debt settlement may involve some amount of debt forgiveness, which may qualify as taxable income.Refinanced student loans may also be eligible for student loan repayment assistance offered by states or employers. Student loan refinancing may diminish your debt relief options, but refinancing does not necessarily disqualify you from being eligible for a nonfederal student loan forgiveness program.Recommended: Employer Student Loan Repayment

Refinancing Federal Student Loans

Refinancing federal student loans means you’ll lose access to federal repayment plans and certain programs that can lead to loan forgiveness. Members of the U.S. armed forces with federal student loan debt, for example, may forfeit military student loan forgiveness on the refinanced debt if they refinance some of their federal student debt.

Refinancing Private Student Loans

Private student loan borrowers may refinance their private student debt. Student refinance loans are private education loans, and lenders of private education loans generally have no obligation to forgive your debts. Private student loan borrowers may have fewer loan forgiveness options than federal student loan borrowers.

Is Refinancing the Right Choice for Me?

As mentioned earlier, refinancing may not be right for you if you’re eligible for federal student loan forgiveness. Federal student loan borrowers generally have more student loan forgiveness options than private student loan borrowers.Refinancing may provide you with a lower monthly payment, but refinancing may also increase your total interest costs.Refinancing federal student loans may not be right for you if you qualify for Public Service Loan Forgiveness. The PSLF program can forgive the remaining balance on your federal student loans after you have made 120 qualifying monthly repayments as a public employee.Recommended: Will Biden’s One-Time Student Loan Forgiveness Happen?

Making Student Loan Payments

Here are some points to keep in mind:
  • Borrowers can make more than the minimum payment when paying off student loans
  • Federal student loans are discharged if a borrower dies
  • Some private lenders may not discharge your debt if you die
Recommended: How Long Does It Take to Pay off Student Loans?

The Takeaway

Student loan forgiveness is more commonly associated with federal student loans than private student loans. The federal government has a variety of programs and repayment plans that can lead to federal student loan forgiveness. Refinancing may be right for you if you can get a lower interest rate, want a lower monthly payment, or both. Obtaining these things largely depends on your credit profile. (Lowering your monthly payment by extending your loan term could increase your total interest costs.) 

Frequently Asked Questions

Are student loans automatically forgiven after 10 years?
At what point are student loans forgiven?
Can you defer student loans after refinancing?
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About the Author

Sulaiman Abdur-Rahman

Sulaiman Abdur-Rahman

Sulaiman Abdur-Rahman writes about personal loans, auto loans, student loans, and other personal finance topics for Lantern. He’s the recipient of more than 10 journalism awards and served as a New Jersey Society of Professional Journalists board member. An alumnus of the Philadelphia-based Temple University, Abdur-Rahman is a strong advocate of the First Amendment and freedom of speech.
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