Student Loans Are Pausing Once More, but If You Can, You Should Probably Continue Making Payments

The current student loan payment moratorium, which has been in effect since March 2020, has been “one final time” extended through December 31, 2022, according to President Joe Biden.

That provides an additional breathing space for the 45 million Americans who still owe money on federal student loans. However, you might still want to consider starting over or continuing your payments. It’s a smart approach to pay off your loan when there isn’t any interest accruing, if you can afford it.

That is especially true considering that only borrowers earned less than $125,000 were eligible for Biden’s $10,000 debt forgiveness. (Recipients of the Pell Grant will have $20,000 of their loan cancelled.) According to Federal Student Aid Data, the average student loan debt is roughly $37,000, and about 2.1 million Americans have debts of more than $100,000.

Continue reading to find out more about the student loan payment freeze and the possible benefits of continuing your payments while they are now suspended. Find out more about student loans by reading our articles on the Public Service Loan Forgiveness programme, student debt cancellation at one for-profit college, and five ways to manage your student debt.

Student Loans Are Pausing Once More, but If You Can, You Should Probably Continue Making Payments
Student Loans Are Pausing Once More, but If You Can, You Should Probably Continue Making Payments

Why should I make student loan payments while they are frozen?

You still owe the outstanding debt even after your student loan payments have been suspended for more than two years. Additionally, interest will resume accumulating once the moratorium is lifted. Anything you can put toward paying off your student loans can help you get out of debt and end up saving you money over the long run.

Think of this student loan payment moratorium as a protracted 0% introductory APR credit card period. Free financing entails that all of your payments will be applied to the principal, lowering the amount of interest you’ll have to pay after the moratorium is lifted. In a study conducted in July and funded by the online banking service Laurel Road and the market research firm HarrisX, 25% of federal borrowers intended to resume payments in September regardless of any extensions.

How can I determine whether or not to continue paying loan payments?

Your specific financial circumstances will determine whether or not continuing to make loan payments is the best course of action for you. It makes no sense to take on additional debt in order to pay off your school loans. Your first concern should be how much you can afford to pay each month toward your student loans. Based on your goals, salary, loan amount, and other considerations, the Federal Student Aid Loan Simulator can assist you in figuring out exactly how much you should pay each month.

What if I’m pursuing loan forgiveness or am enrolled in an income-driven repayment plan?

You can base your payments on your income if you use income-driven repayment options. Your loan debt is forgiven once the length of your plan, which is typically 20 to 25 years, has passed. For each month the payments were suspended, you will accrue credit toward IDR forgiveness if you were enrolled in an IDR plan prior to the freeze. If loan forgiveness is your ultimate goal, there is no motivation to pay during the moratorium because you are already receiving that credit.

The student loan moratorium will also count toward your necessary payments for federal loan relief if you’re pursuing loan forgiveness through the Public Service Loan Forgiveness or Teacher Loan Forgiveness programmes. Again, if this is your circumstance, there is little advantage to making payments at this time.

Recently, the PSLF programme was increased. For qualified public servants like teachers, firefighters, nurses, members of the military, and employees of the government who make on-time payments for 10 years, it removes any outstanding debt on direct student loans. If you previously requested loan forgiveness through the PSLF but were turned down, you might now be eligible thanks to the increased criteria that became effective in October 2021.

If I stopped in March 2020, how can I begin paying again?

Make sure all of your personal information is current and accurate by first getting in touch with your loan servicer. Visit your dashboard on the Federal Student Aid website after logging in if you’re unsure of who your loan servicer is.

The Federal Student Aid website offers connections to servicer sites where you can make payments once you’ve determined who your servicer is. It should be noted that in late 2021, Navient, the company responsible for servicing student loans, transferred all 5.6 million of them to Aidvantage. You should be able to access Aidvantage using your Navient login information if Navient served as your loan servicer.

Your enrollment should still be in effect if you were enrolled in an income-driven repayment plan that set up manageable monthly payments. Since March 2020, each month has been paid, counting toward the number of years required for loan forgiveness. Additionally, you will need to opt in anew if you previously signed up for automatic payments on your federal student loans before March 2020 and want to resume them.

Will the suspension of student loan payments be renewed?

The initial forbearance was established in March 2020 by the CARES act. The deadline was twice extended by President Donald Trump and the Department of Education, and Biden has delayed it five times since assuming office.

Biden announced he will extend the freeze “one final time” to December 31 in a tweet sent out early on Wednesday. Therefore, the likelihood of another extension is low, and the administration has advised borrowers to get ready to begin paying payments in January 2023.

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