Want to refinance your student loan to take advantage of falling rates? This US agency says some 'deceptive' lenders 'mislead student borrowers' about a major downside of refinancing

Refinancing student loans involves moving your debt from government lending programs to a private lender. And it’s becoming increasingly tempting to borrowers looking to save money, Betsy Mayotte, president of the Institute of Student Loan Advisors, told CNBC.

The problem is that refinancing prevents student debtors from taking advantage of federal student loan forgiveness measures, and they’re not necessarily being informed of that fact, the CFPB recently reported.

“Marketing and disclosure materials give a misleading net impression that refinancing federal loans might not result in forfeiting access to federal forgiveness programs, when, in fact, it was a certainty,” the report says.

Lenders also gave “deceptive” bills to borrowers with incorrect amounts, due dates, and unauthorized charges, the agency discovered.

Forgoing forgiveness

Even though President Joe Biden’s ambitious plans to forgive student loans for tens of millions Americans have been severely hampered by litigation, there are still several ways for borrowers to get relief from federal student loans.

Public Service Loan Forgiveness is for full-time employees of U.S. government institutions including federal, state, local and tribal governments. Non-profit organizations’ staff and military personnel are also eligible for forgiveness. But employees of for-profit government-contracted companies, partisan political organizations, and labor unions do not qualify.

The Department of Education has a handy search tool that shows whether you’re eligible for this kind of debt relief.