Student loan payments remain suspended. Should you still pay?

What is happening

The suspension of federal student loan repayments continues until at least September, but borrowers still owe their debt balances.

why is it important

Since full student loan forgiveness seems unlikely, borrowers could pay off their debts interest-free during the break.

And after

The Biden administration could further extend the moratorium, or student loan payments and interest will start again on September 1, 2022.

Nearly 60% of borrowers — or about 11.5 million people — made no federal student loan repayments between August 2020 and December 2021, according to the Federal Reserve. As of March 2020, federal student loan repayments have been suspended, with the most recent extension defer redemption to September 1, 2022.

Although payments are not required at this time, borrowers box continue to repay their loans, and that might be a good idea. The latest reports from the White House indicate that President Joe Biden student loan cancellation plan will only provide $10,000 of relief to borrowers below a certain income.

When September arrives, payments and interest for most borrowers will start again. The current moratorium gives those with federal student loans the ability to pay off the principal of their debt without any new interest accruing.

Read on to learn more about the student loan repayment moratorium and why you might want to keep making payments now. To find out more, discover five ways to take control of your student loans and get the scoop on the Civil Service Loan Cancellation Program.

Why should I pay my student loans during the freeze?

Although student loan repayments have been suspended for over two years now, you owe the remaining balance of your loans and interest will begin to accrue in September unless the deferral is extended or student loan debt is somehow canceled.

Since payments during the moratorium are essentially additional, any amount you can allocate to your student loans will reduce your debt, saving you money in the long run.

This interest-free moratorium period provides a great opportunity to pay off your student loan debt, if you are able. Think of this student loan payment freeze as a long introductory period of 0% APR on a credit card. Free financing means that all of your payments will go directly to repaying the principal of your loan, which will reduce the amount of interest you will pay after the moratorium is lifted.

How do I decide if I should continue to repay my loan?

Whether or not pursuing loan repayments is the right decision for you will depend on your personal financial situation and whether or not you are working towards canceling your loan. The big question you need to answer: “How much can I afford to spend on my student loans each month?”

You shouldn’t pay more than you can afford each month. Going into debt in another way to pay off your student loans doesn’t make much sense.

The Federal Student Aid Loan Calculator can help you figure out exactly how much you need to pay each month based on your goals, loan amount, and other information. Once you have logged into the Federal Student Aid site, the simulator will have all of your student loan details pre-loaded.

What if I’m on an income-driven repayment plan or working toward loan forgiveness?

Income-driven repayment plans allow you to make payments based on your salary. After the term of your plan – usually 20 to 25 years – your loan balance is forgiven. If you were on an IDR plan before the freeze, you will receive credit for the IDR discount for each month of the payment pause. Since you are already receiving this credit, there is not much incentive to pay during the moratorium if loan forgiveness is your ultimate goal.

If you are striving for loan forgiveness under the Civil Service Loan Forgiveness or Teacher Loan Forgiveness Program, any months of the student loan moratorium will also count toward your required payments. for federal loan relief. Again, there is little benefit to making payments during this time if this is your situation.

The Cancellation of civil service loans program was recently expanded. It forgives any remaining debt on direct student loans for eligible public servants such as teachers, firefighters, nurses, military, and government employees who make payments on time for 10 years. If you have previously applied for loan forgiveness through the PSLF and been denied, you may now qualify through the expanded requirements rolled out in October 2021.

How do I start making payments again if I stopped in March 2020?

Start by contacting your loan manager and verifying that all of your personal information is correct and up-to-date. If you don’t know who your loan officer is, log on to the Federal Student Aid website and visit your dashboard.

Once you identify your repairer, the Federal Student Aid site provides links to repairer sites for making payments.

It should be noted that the loan officer Navient transferred all of its 5.6 million student loans to provider Aidvantage end of 2021. If Navient was your loan manager, you should be able to log into Aidvantage with your Navient credentials.

If you were enrolled in an income-driven repayment plan designed to establish affordable monthly payments, your enrollment should still be in place. All months since March 2020 will count as paid for the years you need for the loan to be forgiven.

Also, if you signed up for automatic payments on your federal student loan before March 2020 and want to start them, you’ll need to sign up again.

Will the student loan repayment freeze be extended again?

The deadline to end the moratorium on federal student loan repayments has been extended six times so far. The March 2020 CARES Act established initial forbearance in March 2020. President Donald Trump and the Department of Education extended the deadline twice.

Biden has pushed back the end of the payment freeze four time since taking office. Many Democrats want the president to extend the deadline until at least the end of 2022, but further extensions may depend on any White House plans to offer some form of widespread student loan forgiveness before September.

What are the odds that my student loan debt will be completely forgiven?

Not great unless you owe $10,000 or less in federal loans. Biden campaigned on the cancellation of $10,000 in student loan debt, and recent reports indicate that the student loan cancellation would include a income cap.

According to federal student aid data, borrowers have an average of $37,014 in student loan debt and 2.1 million borrowers owe more than $100,000 in the first quarter of 2022.

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