Understand Refinancing and Why Earnest Doesn’t Offer Student Loan Forgiveness


Earnest won’t qualify for federal student loan forgiveness via the Department of Education since they’re a private lending institution. There’s no loan forgiveness for Earnest borrowers since they focus on aiding both clients and prospective students in navigating wise financial choices, ensuring swift repayment of their student loans. It’s strongly recommended for individuals considering their services to thoroughly explore all available options before embarking on a new student loan application or contemplating the refinancing of existing federal student loans.

What it means to refinance your student loan with a private lender

When you choose to refinance your federal student loan with a private lender, be aware that you forfeit access to several benefits provided by the Department of Education:

  • The temporary 0% interest rate on federally held loans.
  • The suspension of payments, applicable until December 31st, 2022.
  • Federal loan debt cancellation.
  • Any relief measures established to address the challenges posed by the COVID-19 crisis.
  • Income-based repayment (IBR) plans, including PAYE (Pay As You Earn).
  • General forgiveness programs like the Teacher Loan Forgiveness program, Public Service Loan Forgiveness program, or Perkins Loan Cancellation and Discharge.

However, if you find yourself unable to meet your loan payments, we have alternative options designed to accommodate your situation. For more detailed information, feel free to explore this article on student loan refinancing and this article dedicated to private student loans.

What is Biden’s student loan forgiveness plan?

During the middle of 2022, the Biden administration unveiled a proposal aiming to provide forgiveness of up to $20,000 in student loan debt for individuals who received Pell Grants and up to $10,000 for other federal borrowers. Eligibility criteria stipulate that single tax filers must have an adjusted gross income for either 2020 or 2021 below $125,000, while married joint filers must exhibit an AGI under $250,000.

Pell Grants, a form of aid for undergraduates with significant financial need, represent non-repayable assistance. Notably, Pell Grant recipients constitute over 60% of federal student loan borrowers.

Despite the administration’s claim that President Biden’s debt relief plan would alleviate debt burdens for 43 million borrowers, the initiative has encountered numerous legal challenges. In November, the Education Department ceased accepting applications for loan forgiveness, and the US Supreme Court is currently scrutinizing the plan’s legality.

Are refinanced student loans eligible for forgiveness?

The Biden administration’s debt relief plan does not extend forgiveness to federal student loans that have been refinanced. This exclusion is attributed to the absence of a federal government-managed refinancing program. When federal student loans undergo refinancing, a private lender pays off the existing loans, creating a new private loan. Consequently, repayment shifts from the Department of Education to the private lender.

While refinancing may yield benefits such as lower interest rates or shorter repayment terms, it does come at the cost of forfeiting access to government benefits like loan forgiveness, forbearance, emergency relief, and income-driven repayment.

Conversely, federal consolidation loans are eligible for forgiveness under Biden’s proposed plan. The condition is that the underlying loans must have originated as Education Department-held loans or FFEL or Perkins loans not held by the ED, with the lender disbursing them before June 30, 2022.

Examples of borrowers who can receive student loan forgiveness

Typically, you have the opportunity to secure full or partial cancellation of your student loans through the completion of a forgiveness plan, such as the Public Service Loan Forgiveness (PSLF), or if your ability to fully repay the loans is impeded by circumstances beyond your control.

Furthermore, loan discharge may apply in situations where you borrowed funds on behalf of a child who has passed away or become disabled. Additionally, if you fail to repay your loans within a 20 to 25-year period while enrolled in an income-based repayment plan, discharge options may become available.

Borrowers on income-driven repayment plans

The concept behind income-driven repayment (IDR) plans is to assist in the effective management of federal student loan payments, tailoring them to a borrower’s income and family size. In the event that borrowers still have outstanding balances on their loans after consistently making payments for a duration of 20 to 25 years, depending on the chosen plan, there is potential eligibility for loan forgiveness. It’s important to note, however, that the forgiven balance is subject to taxation as income in the year it is received.

Borrowers working for a qualified public service employer

The program known as Public Service Loan Forgiveness (PSLF) offers a pathway to loan forgiveness for individuals engaged in public service roles who fulfill specific criteria. It stands out as a prevalent method through which student loan borrowers secure forgiveness for their loans.

Borrowers working as teachers

The Teacher Loan Forgiveness initiative is a federal program crafted to extend loan forgiveness to educators contributing their services in low-income schools. Under this program, qualifying teachers have the opportunity to receive forgiveness of up to $17,500 on their Direct or FFEL Subsidized or Unsubsidized Loans after successfully completing five consecutive years of teaching at an eligible school.

Borrowers with disabilities

Should you find yourself facing a total and permanent disability, there exists a possibility for you to qualify for the discharge of your federal student loans through the Total and Permanent Disability (TPD) Discharge program. It’s essential to note that this program is applicable to both Direct Loans and loans under the Federal Family Education Loan (FFEL) Program.

Borrowers whose school closed while they were still enrolled

The closed school discharge serves as a remedy for federal student loans acquired for a particular program of study that proved inaccessible due to the closure of the institution while the borrower was still enrolled. This discharge, facilitated by the Department of Education, is a supportive measure aimed at providing relief for individuals who, due to the closure of the school, were unable to conclude their studies and, consequently, were unable to derive the anticipated benefits from the student loans they undertook.

Understanding the drawbacks of refinancing and borrowing from private lenders

Whether you’re navigating through refinancing decisions, exploring forgiveness programs, or seeking relief due to special circumstances, it’s crucial to be informed. Consider the impact of private lending, understand the implications of loan refinancing, and stay updated on the ever-evolving landscape of federal policies. If you’re facing financial challenges, explore the alternative options available to you. Take charge of your student loans, explore forgiveness avenues, and ensure you’re well-informed about the programs designed to ease your financial burden.


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