Student Loan Pause Extension: When Can You Start Paying Again?
According to the United States Department of Education, after repeated student loan pauses, since they were initially put on hold in March 2020, the repayment of student loans and the accrual of interest are now scheduled to reopen sixty days after any outstanding legal challenges have been addressed.
In the event that the courts do not reach their definitive decisions by the 30th of June, the settlement would still continue one month later, on August 29th, 2023.
There is always the possibility that the moratorium would be extended once more; however, subject matter experts agree that this would merely be a strategy to purchase time and not a long-term solution to the problem of excessively high student loan debt.
According to The Washington Post, which did not identify the source of the information, a White House adviser stated that the goal of another student loan pause is “to make sure debtors don’t have the rug pulled out from under them, rather than an indefinite replacement for loan forbearance.”
Why was the Student Loan Pause Extended?
The CARES Act was signed into law by the United States government in March 2020, right at the beginning of the COVID-19 epidemic. This act put a hold on monthly settlements and prevented interest from accruing on student loans.
Because those who had lost employment or been furloughed were having trouble making ends meet, the government decided to extend student loan repayment, as well as the interest on those loans, in order to make things easier for those individuals.
As more time has passed, our economy and employment growth have both experienced highs and lows, but the relief for student loans has remained in place.
When Will the Student Loan Pause End?
Actually, Biden was counting on his most recent plan to forgive student loans by that time. However, this seems highly unlikely in light of the numerous court judgments that have temporarily blocked debt relief for student loans. Thus, Biden gave debtors extra breathing room by extending the moratorium on student loan settlements until a final ruling could be made.
The possible outcomes of this situation are varied: The proposal to forgive student loans will either be approved or soundly defeated (most likely in the Supreme Court).
Payments on federal student loans will reopen, as expected, sixty days after a decision is made. Alternatively, if a resolution is not made by June 30, 2023, repayment of federal student loans will reopen sixty days later.
To sum up, for the time being, both principal and interest settlements on federal student loans are on hold. But don’t sit on the sidelines while your student loans pile up while we figure out the forbearance mess. Today is the day to start making plans for tomorrow.
Will There Be Another Student Loan Pause?
Another six months have been added to the current extension, making it the longest one so yet. But will further aid for student loans be made available after that?
Over the past two and a half years, settlements have been on hold. This is the eighth time that the deadline has been pushed out. We understand if you feel like you’re the boy who cried out about the end of student loan forbearance.
This, however, is not like the other times. As opposed to simply postponing the deadline by that amount of time, this extension is contingent on the success or failure of Biden’s proposal to reduce the burden of student loan debt. At some point, a choice will need to be made, and that means the settlement hold will end.
As a result, although it’s possible that the date could be pushed back again, you should anticipate that federal student loan settlements will reopen after this forbearance issue is settled (which could literally be any day).
What Should You Know About Biden’s Student Loan Forgiveness Plan?
Those who participate in the program and whose annual income is less than $125,000 (or $250,000 as a couple) would have $10,000 of their public student loans forgiven.
Pell Grant recipients would be eligible for another $10,000 in relief, for a sum of $20,000 in student loan forbearance.
More than 45 million people in the United States have student loan debt, amounting to $1.6 trillion. According to the neutral Congressional Budget Office, this will cost $400 billion over the course of 30 years.
All federally held student loans are included in the settlement and interest moratorium, regardless of who services the loan.
Eligible student loans include Direct Federal student loans, FFEL program loans and Federal Perkins loans held by the Department of Education, defaulted FFEL loans not held by the Department of Education, and Defaulted Health Education Assistance loans.
Should You Wait for Student Loan Forgiveness to Pay Your Loans?
Your first thought is probably, “Why should I pay off my student loans if they’ll be forgiven anyway?”
In short, Biden’s proposed course of action is still in its early stages. Likewise, you shouldn’t be taken by surprise if it doesn’t materialize. And even if it does stand up in court, you probably owe more money than will be canceled out by the settlement.
Why not put away ten or twenty thousand dollars anyway, just in case? That way, you won’t be stuck with outstanding student debt if the forbearance program is ultimately unsuccessful. If your loans are discharged, you’ll get a nice chunk of change that you can put into your future or use to settle other bills. Either way, you come out on top.
Don’t put off paying off your remaining student loans in the hopes that you’ll be able to get them canceled down the road, though. Why? Due to the unreliability of student loan forbearance.
Should You Pay Student Loans While on Pause?
One of the best things you can do to be ready for the end of student debt forbearance is to begin making settlements on your loans right away.
You still have to pay off the outstanding debt of your student loans, even though you haven’t made any settlements on them in almost two years. When the freeze is lifted, interest will reopen mounting at an exponential rate, eventually drowning you.
Spending time productively paying off your student loans will save you money in the long run. Think of the current freeze on your student loan settlements like an extended introductory 0% APR term on a credit card. With interest-free financing, your whole settlement goes toward reducing the debt, which means you pay less interest overall until the moratorium ends.
You don’t have to worry about interest settlements on those installments right now. The majority of your monthly settlement will be applied to reducing the principal balance. It will save you money in the long term if you take advantage of this interest-free offer as soon as possible.
If you want to make real progress on your student loans, now is the time to stay up with the settlements.
Bottom Line
Do yourself a favor and stop counting on the government to fix everything. The fact that President Biden forgives some student loans at the present time is no assurance that he will continue to do so in the future. Don’t sit around hoping your debt will be canceled if you can prevent it.
However, you shouldn’t base your decisions on what’s going on in the White House. Paying off the rest of your student debts fast will save you a ton of time and stress. The process may seem overwhelming at the moment, but success is achieved through accumulating incremental progress.
