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Why this education expert says don't count on student loan forgiveness—and what to do instead in 2021

Here's why student loan borrowers shouldn't rely on complete loan forgiveness in 2021.

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With mounting pressure on the Biden administration to cancel student loan debt, borrowers with unpaid balances face a conundrum, wondering how exactly they should proceed with their monthly payments.

It comes down to a few questions: Should federal loan borrowers take advantage of the current interest freeze and make principal-only payments to more quickly reduce their balance? Or, should they hold out for possible forgiveness and potentially get off the hook for up to $10,000 — a significant chunk of change?

It may feel like an impossible choice. Knocking out your loans (if you can afford it) could bring peace of mind and free your energy to focus on other financial goals. But fast-forward to a hypothetical future in which $10,000 gets forgiven, and you may wish that you'd pocketed that cash or used it for another purpose.

With so much up in the air, experts say don't count on student loan debt getting written off until actual legislation is proposed and signed in ink.

"It is rarely prudent to bank on loan forgiveness when a program or piece of legislation has not yet been created or passed," Ashley Norwood-Struppa, regional manager at AccessLex Center for Education and Financial Capability, tells CNBC Select.

Though the House passed the next stimulus package early Saturday morning, the $1.9 trillion American Rescue Plan excludes any direct relief, such as forgiveness, for student loan borrowers. Recently, President Biden also rejected Democratic lawmakers' push for canceling up to $50,000 in federal student debt per borrower.

Biden and his administration continue to support writing off up to $10,000 in debt — with White House press secretary Jen Psaki saying in a Feb. 4 tweet that they welcome additional legislation by Congress — but concrete actions have yet to be taken.

Ahead, CNBC Select asked Norwood-Struppa, a student loan educator since 2006, about what guidelines she can offer the 42 million Americans with federal student loans while we wait to see whether there's more pandemic aid in store.

What federal student loan borrowers should do

Since Biden has extended the payment pause and interest accrual on federal student loans through at least September 2021, individuals can feel confident taking a break from making their monthly payments at no additional cost to them. This gives them some breathing room while we wait, Norwood-Struppa explains.

But if you can afford it, don't go spending that money you otherwise would have used toward your loans.

"Until more definitive decisions are made on loan forgiveness, it may make more sense to put your expected payment amount away into a high-yield savings account through September," she says.

Deposit your monthly loan payments into a FDIC-insured high-yield savings account while interest is at 0% to buy time while we wait on loan forgiveness. This strategy will prepare you to make payments again or, in the case of forgiveness, it will give you an emergency fund. Both are wins and ensure that your money is used wisely.

"If forgiveness is announced in the future, you would have cushioned your emergency fund and didn't lose out on any loan forgiveness benefits," Norwood-Struppa says. "If forgiveness does not occur, you can decide if taking the amount you saved and paying down your student loans makes financial sense for you."

Consider this top-rated high-yield savings account

The Varo Savings Account is a high-rated option that offers an above-average APY, as well as two programs that automatically transfer money from your Varo bank account to your savings account: Save Your Pay, which transfers a percentage of your paycheck into your savings, and Save Your Change, which rounds up your checking account transactions to the nearest dollar and transfers the difference to your savings.

With the help of Varo's automated savings benefits, you can focus on staying updated on any possible student loan forgiveness and rest assured you'll have money to fall back on regardless of what happens.

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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.