You Don’t Have to Pay Student Loans Now, But Should You?

Federal student loan payments remain on hold, this time until September 2022. However, if you have a student loan balance, you can still make payments and it might be a good idea.

In April, President Joe Biden again extended the moratorium on student loan payments that began in March 2020 at the onset of the COVID-19 pandemic. Along with the temporary pause in payments and interest, all borrowers who default or are in default on their loans — approximately 8 million Americans — will reset their status and start over when payments resume.

The payment pause only applies to federal student loans. If you have a private student loan, you still have to keep paying. The payment moratorium also does not apply to FFELP loans or Perkins loans that are not owned by the Department of Education.

Read on to learn more about the status of the student loan payment moratorium and why you might want to continue making payments despite the pause. For more information, discover five ways to take control of your student loans and get the latest information on the Government Loan Forgiveness Program.

Why should I pay off my student loans during the freeze?

Although student loan payments have been suspended for more than two years, you still owe the balance of your loans and interest will start accruing again in September.

Because payments during the moratorium are essentially additional, any amount you can use toward your student loans will reduce your debt and save you money in the long run.

This interest-free moratorium provides an excellent opportunity to pay off your student loan debt if you are able to. Think of this student loan payment freeze like a long introductory period of 0% APR on a credit card. The free financing means that all your payments go directly towards paying down the loan amount, reducing the interest you will have to pay once the moratorium is lifted.

How do I decide whether to continue making loan payments?

Whether or not continuing to pay off credit is the right decision for you depends on your personal financial situation and whether or not you are working toward debt forgiveness. The big question you need to answer, “How much can I afford to invest in my student loan each month?”

You should not pay more than you can afford each month. Going into another form of debt to pay off your student loans doesn’t make much sense.

Federal Student Aid Loan Simulator can help you determine exactly how much you should pay each month based on your goals, loan amount, and other information. Once you log into the Federal Student Aid website, the simulator comes preloaded with all the details about your student loan.

What if I have an income-based repayment plan or am working toward credit forgiveness?

Income Related Reimbursement (IDR) plans allow you to make payments based on your salary. After the term of your plan – typically 20-25 years – the balance of your loans will be forgiven. If you were on an IDR plan prior to the freeze, you will receive an IDR forgiveness credit for each month of the payment pause. Because you get this loan, there’s not much incentive to pay during the moratorium if forgiveness is your goal.

If you are working toward loan forgiveness under the Public Service Loan Forgiveness or Teacher Loan Forgiveness programs, all student loan moratorium months also count toward payments required for federal loan relief. Again, there is little benefit in making payments during this time.

The government loan forgiveness program has recently been expanded. It forgives all remaining direct student loan debt for qualified public employees such as teachers, firefighters, nurses, military personnel and government employees who make payments on time for 10 years. If you have previously applied to the PSLF for loan forgiveness and been denied, you may now qualify through the enhanced requirements introduced last October.

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

First, contact your credit service provider and verify that all of your personal information is correct and up-to-date. If you’re not sure who your loan servicer is, log in to the Federal Student Aid website and visit your dashboard.

Once you have identified your servicer, the Federal Student Aid website provides links to payment servicer websites.

It’s worth noting that loan manager Navient transferred its 5.6 million student loans to provider Aidvantage in late 2021. If Navient was your credit administrator, you should be able to log into Aidvantage using your Navient credentials.

If you were enrolled in an income-based repayment plan designed to set affordable monthly payments, you’re still enrolled. All months since March 2020 will count as paid toward the 20-25 years of payments you need for the loan to be forgiven.

If you registered for automatic payments on your federal student loan prior to March 2020 and wish to start them, you will need to register again.

Will the student loan freeze be extended again?

The deadline for ending the student loan moratorium has been extended six times so far. The March 2020 CARES Act established the original forbearance in March 2020. President Donald Trump and the Department of Education twice extended the deadline.

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

What are the chances that my student loan debt will be forgiven in full?

Not great unless you owe $10,000 or less in federal loans. Biden campaigned on forgiving $10,000 in student loan debt, and recent reports suggest that student loan forgiveness would include an 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. You Don’t Have to Pay Student Loans Now, But Should You?

Chris Barrese

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