Extending the student loan payment suspension: what to do now
- Federal student loan payments will continue to be suspended until August 31, 2022.
- You can use the extra time to review your loan account details and pay off debt aggressively.
- A repayment pause is temporary. You will need to pay off your loan balance when payments resume.
- Learn more about Insider loan coverage here.
Repayment of federal student loans will remain suspended until August 31, the Biden administration announced in a press release on Wednesday. During this period, no interest will accrue on loans and borrowers are not required to make any payments.
If this continuous payment pause sounds familiar, that’s because it is; The Trump and Biden administrations have extended this moratorium a total of six times. Repayment of federal student loans has been suspended since March 2020 in an effort to ease some of the financial burden of the pandemic.
When will student loan repayments resume?
As of now, student loan repayments will resume on August 31. However, this is not the first time the deadline has been extended.
The COVID-19 pandemic has continued to pose significant financial challenges for many people in the United States. The government responded to the first wave of the pandemic in March 2020 with a robust aid package that included a pause in student loan repayments.
As the spread of the pandemic gradually begins to slow, its financial effects are still rippling through the entire US economy. This extension is intended to give borrowers time to get back on their feet financially and to get loan repayments back into their budget.
“Even for those who were prepared, thousands of people have lost their jobs, touched their wallets and stormed into their reserves, and are trying to get a foothold in this new normal,” said Dawn Dahlby, Founder and Board Chair. . Relevé Financial Group firm. “The pause is the government’s way of lending a helping hand and putting more money back in the pockets of those who need it most.”
How is a student loan repayment pause different from a loan forgiveness?
A repayment pause is simply a temporary period during which you do not have to make repayments. Forgiveness, alternatively, would permanently eliminate some or all of your debt.
“Look at it this way: you’re currently forgiven your monthly payment and accrued interest, but when the moratorium finally ends, you’ll pick up where you left off in March 2020,” says Andrew Pentis, a Certified Health Advisor. student loans and student debt expert at Student Loan Hero. “If you had $15,000 in federal debt at the time, that’s at least the amount you’ll owe once you resume active repayment.”
Much of the conversation around federal student loan forgiveness has focused on President Biden’s campaign promise to cancel student debt. Politicians and activists have campaigned for the government to write off between $10,000 and $50,000 in debt, though none of these proposals are official.
Instead of waiting for forgiveness, put a plan in place to resume payments.
“Keep up to date with deadlines and other updates to make the best decisions possible,” says Dahlby. “As we have seen many times now, the government will continue to change its plans for how long the pause will last, and despite this uncertainty, one thing remains constant – you have time to prepare for loans if and when payments are coming due, and the best time to start this preparation is today.”
What should I do with my student loans now?
You have until the end of the summer before payments start to resume on your student loans, that is, if the moratorium is not extended again. If you haven’t thought about your loans in the last two years (a lot has happened, we don’t blame you), start with the small things.
Pentis says you should contact your federal loan officer to make sure all of your contact information is correct. Over 16 million borrowers have or will have a new loan servicer in the coming months, so make sure your information is transferred correctly.
You should review your account details, including your loan balance and the interest rate on your loan.
Neeta Vallab is the founder of MeritMore, a research tool that allows students to estimate the amount of merit aid they could receive from particular schools based on their GPA and test scores. She says using the time to pay off your student loan debt as aggressively as possible can help you meet your repayment obligations more quickly.
“Time is always against you when you have loans that earn interest,” says Vallab. “If you’re lucky enough to be in a phase where interest has essentially stopped, now’s a great time to hustle. If you need money to pay rent, food, medical bills, etc. ., you have a little room to take care of things.”
How can I pay off my student loans faster?
Although you don’t have to, you may want to continue paying off your student loan if your finances are still in good shape.
Usually, when you repay your loans, you have to pay the principal, or the total amount you owe, plus interest on the loan. But since the government won’t be charging you interest for the next few months, your payments will go entirely to the loan balance. This will allow you to pay off your balance faster and pay less interest over the life of the loan.
On the other hand, you can also use the time to make further progress on your other financial goals. You may want to pay off other high-interest debt, build an emergency fund, or set aside money for your retirement.
“Investing money that would otherwise be spent on loan repayments, finding opportunities to increase cash flow, and eliminating unnecessary spending are all things borrowers can do over the coming months,” Dahlby says.