Should You Make Student Loan Payments During the Pause?
Since President Joe Biden declared that federal student loan payments and interest rate would be frozen from January 2020 to September 2021, borrowers have been wondering: should they make their student loans payments during the freeze? This article will discuss whether or not borrowers should make payments during this indefinite federal loan payment pause.
The Impact of the Pause
In response to the COVID-19 pandemic and its significant financial burdens, president Joe Biden declared that all federal student loan payments and interest rate will be frozen until September 2021. This means that as long as borrowers have federal student loan debt before the freeze is active, they do not need to make payments and do not accrue any interest. The temporary payment pause is intended to provide relief to financially strained borrowers.
Notable Benefits of the Pause
The pause on federal student loan payments and the forgiven interest can provide borrowers with a significant financial reprieve. While no payments must be made during the pause, borrowers can still choose to make payments – effectively prepaying their loan debt. There are two main advantages to choosing to make payments during the pause:
• Significant Interest Saving: By making payments on their loans during this period borrowers can avoid incurring any deferred interest. This is a particularly noteworthy benefit as interest payments can add up over a period of time and place a heavy burden on borrowers.
• Payoff Acceleration: Making payments during the pause can help borrowers accelerate loan payoff. The faster borrowers pay off their loans, the less interest they will have to pay over the long-term.
Considerations Before Making Payments
While borrowers are strongly encouraged to make payments during the pause if they can financially afford to do so, there are a few important considerations they should keep in mind:
• Borrower Situation: All borrowers have different financial situations and obligations, so consider your own financial obligations, income sources, and budget before you decide to make a payment.
• Non-Federally Held Loan Debt: Before making payments, it is important to note that the freeze only applies to federally held student loan debt. Any non-federal loans may still require regular payments during this period.
• Prioritizing Debt: If you are experiencing a financial strain, consider paying off the debt with the highest interest rate first before making payments on lower-interest loans.
• Private Loan Options: Private loan forbearance options may be available during the pause. Consider contacting your private student loan provider to see if and what forbearance options may be available.
The pause on federal student loan payments and interest rate can be a great way for borrowers to save money on their student loans. While making loan payments during the freeze can provide some significant benefits, it is ultimately up to the borrower to decide if they can financially afford the payments and if they should prioritize their debt payments accordingly. Furthermore, borrowers should always be sure to check and confirm the details of the freeze, as any non-federally held loan debt may still require regular payments during this period.
