In August, the White House sought to provide student loan borrowers with permanent relief in the form of debt cancellation. With that now being decided by the courts, the Biden administration announced it would extend the pause on federal student loan repayments.
This pause is a holdover from the pandemic, initially extended as a form of hardship relief in the midst of lockdowns and job loss. Payments and interest on federal student loans have been paused since March 2020.
Reports indicate billing could resume by May 1, 2023 at the earliest. That’s because the Biden administration will be defending its student loan cancellation plan in court, and proceedings could last into the spring or even summer. The Department of Education has said repayments will resume 60 days after litigation closes.
Should I Pay Anyway?
Given the high level of uncertainty tied to student loan forgiveness, many have chosen to take advantage of the extended repayment pause, even if they can afford to make payments. But for some, it makes sense to continue paying anyway.
For those without credit card debt — or with a healthy emergency fund — continuing to make payments without interest is a low pressure way to build a strong credit profile. The reality is, no one can be certain whether or not student loans will be canceled. So it may be wise to take advantage of related opportunities while they last.
There are notable exceptions, however. Those utilizing an income-driven repayment plan may want to avoid making payments during the pause. So might anyone pursuing public service loan forgiveness, which is separate from the broader student loan cancellation issue. Any payments made now reduces the amount you’d be excused later.
Making the Most of the Pause
As we near the new year, recessionary fears linger, as do climbing prices and rampant inflation. Although the job market remains resilient, an extended financial downturn would increase the risk of layoffs. For that reason, you may want to use the repayment pause to focus on building up your cash reserves.
Use interest rates to your advantage. Consider putting any extra cash toward paying down balances with high rates, such as credit cards. Higher interest rates also mean you can find more attractive returns within some savings accounts.
You paid for the degree, as evidenced by the debt — now you just need to put that knowledge to work financially.
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