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With student loan debt in the U.S. at the $1.7 trillion mark, it’s no wonder many borrowers are thrilled by the idea of student loan cancellation. With what many consider to be a student loan crisis, who wouldn’t love to wake up and suddenly see five figures of student loan debt vanish? 

Several programs offer student loan forgiveness to U.S. borrowers, such as those for someone who is disabled or works in a public-service profession. However, not everyone is eligible for them. Should borrowers pay their loans all back right away, refinance student loans, or wait based on the hope of broader student loan cancellation? 

Chances of loans getting forgiven

Although many presidential candidates included student loan forgiveness in their campaign platforms, the chances of all student loan debt being canceled completely are not good. Despite pressure from fellow Democrats, President Biden has always leaned more on the conservative side of loan forgiveness, saying he would support legislation for $10,000 loan forgiveness, but no more. 

Biden also prefers using Congressional action, rather than executive power, to make such a proposal the law of the land. If Congress drafts a bill to forgive $10,000 in student loans, it will take much longer to become official than an executive order. Considering the recently-passed $1.9 trillion economic stimulus package, lawmakers might not be too keen on passing another costly bill. And for many borrowers, that amount only tackles part of the problem. 

Why you might wait to pay off student loans

Due to the coronavirus pandemic, student loan payments and interest are on pause until the end of September 2021. This measure was first passed in March 2020 with the CARES Act and has been extended several times since then. This legislation presents an opportunity to hold off on making student loan payments — but only temporarily. 

Borrowers aren’t required to make their regular monthly payments and won’t be charged any additional interest in the meantime. It’s smart to take advantage of this pause, especially if you’ve been unemployed. 

If you’re still earning the same as you did pre-pandemic, you could funnel extra funds into savings or pay for emergencies. You might also set aside the same amount as your loan payments to have ready to go on October 1, when loan repayment is set to resume. 

If you’re waiting because you expect the remainder of your loan balance to be forgiven, you might be disappointed. Be prepared to begin repayment right away, or even pay extra once the pause ends, to reduce the overall interest you’ll pay. 

Either way, if you hope to benefit from student loan forgiveness and you’re not already in a program like the Public Service Loan Forgiveness (PSLF) program, here’s what you should know. You’re still responsible for private loans since any forgiveness plan that Congress passes will target federal loans only. 

When refinancing might be a better option

One student loan repayment strategy you should consider is refinancing. By refinancing your student loans, you bring them all together into one balance with one monthly payment with a single interest rate. Many lenders offer significantly lower interest rates on student loans when you refinance. Borrowers can peruse the various student loan refinance companies on Student Loan Planner, and compare the benefits each offers. 

When you refinance your student loans, dropping your interest rate by even a couple of percentage points has a great impact on the total amount you’ll pay over your loan term. Try out online refinancing calculators to estimate how much you’d save with a student loan refinance.

Refinancing becomes more advantageous the longer you plan to pay off your balance. With more than five years remaining on an existing student loan, refinancing is a great option. When faced with a shorter loan term remaining, refinancing is less impactful. It might be wise to refinance now, before rates in general potentially increase. 

There’s nothing wrong with hoping for student loan forgiveness and following the necessary steps to qualify. But some lawmakers believe that student loan forgiveness is a bad idea, so it is certainly not guaranteed at this point. Plan as if your student loans will not be forgiven, and be ready to pay them when the pause on interest and payments is over. 

Even the current federal loan forgiveness programs don’t always pan out for borrowers: many have been disqualified by a minor technicality. Forgiveness across the board may sound exciting, but don’t pin all of your hopes for the future on that possibility. 

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