Should You Stop Paying Student Loans During Student Loan Relief?
Here is what you need to know.
President Joe Biden surprised just about everyone when he extended the student loan payment hiatus for an additional 90 days until May 1, 2022. Student loan relief due to the Covid pandemic- 19 has been ongoing since March 2020, when Congress passed the temporary forbearance of student loans under the Cares Act, the $ 2.2 trillion stimulus package. Prior to this latest extension, student loan borrowers would have resumed paying off their student loans on February 1, 2022. Now that federal student loans are on hold again, you might be wondering if you should be making student loan payments. . Let’s explore. (Student loans can be suspended, but here’s why Biden extended student loan relief.)
Student loans: you don’t have to make federal student loan repayments
The current student loan relief does not require you to make federal student loan payments. (What Biden’s Latest Student Loan Relief Means for Your Student Loans). Therefore, by May 1, you may decide not to repay your federal student loans. Plus, there is no new interest accrued on your federal student loans and no collections of delinquent student loans. The benefits of not paying your federal student loan payments can be obvious. For example, you could use the money to pay for living expenses or pay off other high-cost debts. Alternatively, you can save for your retirement, invest, or save to buy a home. These are some of the uses student loan advocates have listed to advocate for large-scale student loan cancellation as well. (How student loan payments will be easier in 2022).
Student loans: you need to make private student loan repayments
Unlike federal student loans, you have to make private student loan payments. The Cares Act only applies to federal student loans. If you have private student loans, you must pay monthly as required by your lender or student loan manager. Unfortunately, there is no direct student loan relief for private loans. (Is Student Loan Debt Cancellation the Next Step?) That said, if you’re having trouble making private student loan repayments, consult your student loan manager for student loan repayment options. , such as postponement or abstention.
Consider making optional federal student loan payments
The idea of making optional federal student loan payments may seem counterintuitive. Why would you want to make an optional student loan payment when student loan relief doesn’t require you to do so? (Here’s how to get a student loan discount during the Biden administration). The answer is, you can save a lot of money by making optional student loan payments. Since there is no new interest accrued during the student loan loan forbearance period, that means every dollar you pay during this period will directly pay off the interest on existing student loans. Once you’ve paid off the student loan interest, each additional dollar will directly reduce your student loan balance. (How to qualify for the automatic student loan exemption). Therefore, this period of student loan relief is a unique opportunity to make additional student loan payments without accumulating new interest. With a lower principal balance, that means less interest can accumulate, which means you can pay off your student loans faster.
Student loans: next steps
Remember that you are not required to make any federal student loan payments. Whether you want to make optional payments for your student loan is up to you. You may not have extra money to pay off student loans now, so it is financially beneficial to use your financial resources for other activities. Importantly, student loan relief will not last forever. Make sure you have a student loan repayment game plan. Start now to understand all of your options. Here are some popular ways to pay off student loans faster: