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Will my private student loans be forgiven? What borrowers need to know about Biden’s student loan forgiveness

Select explains how Biden's potential student loan forgiveness plan would impact private borrowers.

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In early April, President Biden asked the U.S. Department of Education to see if his executive authority gives him the ability to enact massive student loan forgiveness without congressional approval.

While this signaled to many borrowers a promising next step toward student loan cancellation, just how it would potentially play out is still unclear. If widespread student loan forgiveness is an option, we still don't know when it would happen, how much debt would be canceled and exactly who would qualify.

One thing we do know: It's not likely the Biden's administration can cancel private loans.

The student loan forgiveness being discussed by the Biden administration — and the forgiveness that Democrats Chuck Schumer and Elizabeth Warren proposed — applies only to those with federal student loans. These are borrowers who took out student loans owned by the U.S. Department of Education.

Private student loan borrowers, on the other hand, are those who take out loans owned by private companies, like online lenders or national banks. Even though the majority of student loan borrowers — about 92% — hold federal loans, private student loans still make up 7.71% of the $1.71 trillion total outstanding student loan debt in the U.S.

What private student loan borrowers should do

While private loan borrowers can't count on sweeping student loan forgiveness to erase their debt, there are steps they can take to make their loans more manageable. Refinancing for a lower interest rate is certainly not as good as having your loans completely wiped out, but it's a smart financial move that will pay off the sooner you choose to make it.

When private student loan borrowers refinance, they swap their current private student loan(s) for one new loan. This can be from their same lender (if offered) or through a different lender of their choice.

With rates at historic lows, now is a good time for private student loan borrowers to consider refinancing before they go up again. As Covid restrictions ease and the economy improves over time, the Fed will again raise rates and refinancing may not be as cheap. And if your credit score is better than when you applied for your private student loan, you have a better chance at qualifying for a low rate.

Use a loan marketplace like Credible to compare lenders or take a look at Select's top picks. You're likely to see the most savings from refinancing when choosing a lender that offers competitive interest rates, zero application or origination fees and no penalties for prepayment — which all of our selections do.

Here are our best student loan refinance companies:

Editorial Note: Opinions, analyses, reviews or recommendations expressed in this article are those of the Select editorial staff’s alone, and have not been reviewed, approved or otherwise endorsed by any third party.