Student Loans Will Likely Be Paused Again, but Make Payments Anyway

What’s happening

Federal student loan payments are slated to resume on Sept. 1, but signs point to another extension of the current moratorium.

Why it matters

Since total student loan forgiveness seems unlikely, borrowers can pay down their debt during the pause while no interest accrues.

What’s next

President Biden has said he’ll make an announcement about the student loan payment freeze before September.

After six extensions by two presidents, the student loan payment freeze is quickly approaching its end. Analysts believe President Joe Biden will renew the moratorium, slated to end on Sept. 1. But even if he does, borrowers can continue to pay their loans back — and it’s not a bad idea if you can afford it. 

The latest indications from the White House are that Biden’s long-term plan for student loan forgiveness will only provide $10,000 in relief –and only to borrowers under a certain income. So while payments are suspended, it’s a good time for those with federal student loan debt to pay down the principal while no new interest accrues.

Read on to learn more about the student loan payment freeze and why you might want to keep making payments now. 

For more on student loans, discover five ways to take control of your student debt and get the scoop on the Public Service Loan Forgiveness program and the cancellation of student debt at one for-profit college.

Why should I pay my student loans during the freeze?

Although student loan payments have been paused for more than two years, you still owe the remaining balance. And interest will start accruing again — either in September or whenever the moratorium is lifted. Even if the Biden administration rolls out a student loan forgiveness plan, it’s unlikely to be a total erasure of debt and will almost assuredly include salary caps.

Since payments during the moratorium are essentially extra, anything you can direct toward your student loans will reduce debt, saving you money in the long term.

Consider this student-loan payment freeze like a long intro 0% APR period on a credit card. The free financing means that all of your payments will go directly toward paying down the principal, reducing the interest you’ll pay once the moratorium is lifted.

How can I decide if I should keep making loan payments?

Whether continuing to make loan payments is the right decision for you depends on your personal financial situation and if you’re working toward loan forgiveness. The big question you need to answer: “How much can I afford to put toward my student loans each month?”

You shouldn’t pay more than you can afford, of course. Going into another form of debt to pay off your student loans doesn’t make sense.

The Federal Student Aid Loan Simulator can help you determine exactly how much you should pay each month based on your goals, salary, loan amount and other factors.  

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’ll receive credit toward IDR forgiveness for each month of the payment pause. Since you’re already receiving that credit, there’s not much incentive to pay during the moratorium if loan forgiveness is your ultimate goal.

If you’re working toward loan forgiveness through the Public Service Loan Forgiveness or Teacher Loan Forgiveness programs, all months of the student loan moratorium will also count toward your payments required for federal loan relief. Again, there’s little benefit to making payments during this time if this is your situation.

The PSLF program was recently expanded. It cancels any remaining debt on direct student loans for qualifying public servants like teachers, firefighters, nurses, military members and government workers who make on-time payments for 10 years. If you previously applied for loan forgiveness through the PSLF and were denied, you may now qualify through the expanded requirements that rolled out in October 2021

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

Start by contacting your loan servicer and checking to make sure that all of your personal information is correct and updated. If you’re not sure who your loan servicer is, log in to the Federal Student Aid website and visit your dashboard.

Once you’ve identified your servicer, the Federal Student Aid site provides links to servicer sites for making payments.

It’s worth noting that loan servicer Navient transferred all of its 5.6 million student loans to the provider Aidvantage in late 2021. If Navient was your loan servicer, you should be able to log in at 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 the months since March 2020 will count as paid toward the years you need for the loan to be forgiven.

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

Will the freeze on student loan payments be extended again?

The CARES act in March 2020 established the original forbearance that month. President Donald Trump and the Department of Education extended the deadline twice and Biden has postponed it four times since taking office.

The latest deadline for the end of the moratorium on federal student loan payments is Sept. 1, 2022. Biden has said he will make an announcement about another extension before then. With inflation still high — and midterm elections in November — many analysts believe he will push the deadline again to the end of the year or even into summer 2023.

In July, the Department of Education told student loan providers not to contact borrowers yet — another sign of a further extension.

Activists outside of the White House call on President Biden to cancel student debt.  

Anna Moneymaker/Getty Images

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

Not great, unless you owe $10,000 or less in federal loans. Biden campaigned on forgiving $10,000 of student loan debt, and recent reports indicate 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. As of the first quarter of 2022, some 2.1 million Americans each owe more than $100,000.

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