- Payments on federal student loans will continue to be suspended through August 31, 2022.
- You can use the extra time to review details of your loan account and pay down debt aggressively.
- A repayment break is temporary. You will have to pay the balance of your loan when payments resume.
- Read more of Insider’s loan coverage here.
Repayment on federal student loans will remain paused until August 31, the Biden administration announced in a news release on Wednesday. During this period, interest will not accrue on the loans and borrowers aren’t required to make any payments.
If this continued payment pause sounds familiar, it’s because it is; The Trump and Biden administrations have extended this moratorium six times in total. Federal student loan repayment has been on hold since March 2020 in an effort to lift some of the financial burden of the pandemic.
When will student loan payments resume?
As of now, student loan payments will resume August 31. However, this is not the first time the deadline has been extended.
The COVID-19 pandemic has continued to cause significant financial challenges for many people across the US. The government met the initial wave of the pandemic in March 2020 with a robust aid package that included a pause on student loan repayment.
As the pandemic’s spread gradually begins to slow, its financial effects are still reverberating throughout the US economy. This extension is meant to give borrowers time to get back on their feet financially and work loan payments back into their budgets.
“Even for those who were prepared, thousands of people lost their jobs, took hits on their portfolios and broke into their reserves, and are trying to gain their footing in this new normal,” says Dawn Dahlby, the founder and president of the advisory firm Relevé Financial Group. “The pause is the government’s way of lending a hand and putting more cash back in the pockets of those who need it most.”
How does student loan repayment break differ from loan forgiveness?
A repayment break is simply a temporary period in which you do not have to make loan payments. Forgiveness, alternatively, would permanently eliminate some or all of your debt.
“Look at it this way: You’re currently being forgiven your monthly payment and accruing interest, but when the moratorium finally ends, you will pick up where you left off in March 2020,” says Andrew Pentis, a certified student loan counselor and student debt expert at Student Loan Hero. “If you carried $ 15,000 worth of federal loan debt back then, that’s at least how much 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 forgive 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 for when payments resume.
“Keep on top of deadlines and other updates to make the best possible decisions,” Dahlby says. “As we’ve seen several times now, the government will continue to change their plans on how long the break will be, and despite that uncertainty one thing remains constant – you have time to prepare for the loans if and when payments come due, and the best time to start that preparation is today. “
What should I do with my student loans now?
You have until the end of summer before payments begin resuming on your student loans – that is, if the moratorium does not get extended again. If you have not been thinking about your loans for the past two years (there’s been a lot going on, we do not blame you), start with the small stuff.
Pentis says you should reach out to your federal loan servicer to make sure all 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 transfers correctly.
You should review the details of your account, including your loan balance and the interest rate on your loan.
Neeta Vallab is the founder of MeritMore, a search 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 down your student loan debt as aggressively as possible can help you fulfill repayment obligations more quickly.
“Time is always against you when you have loans that accrue interest,” Vallab says. “If you are lucky enough to be in a phase where interest is essentially stopped, it’s a great time to hustle. If you need money to pay for rent, food, medical bills etc, you have a bit of room to take care of those things. “
How can I pay my student loans faster?
While you’re not required to, you may want to keep making student loan payments if your finances are still in decent shape.
Usually when you pay down your loans, you have to pay the principal, or total amount you owe, plus interest on the loan. But because the government will not charge you interest for the next several months, your payments will go completely toward the balance of the loan. This will allow you to pay down your balance more quickly and pay less interest during the loan term.
On the other hand, you can also use the time to further progress on your other financial goals. You may want to pay down other high-interest debt, build up an emergency fund, or put money toward retirement.
“Investing the money that would otherwise go towards loan payments, finding opportunities to increase cash flow, and eliminating unnecessary expenses are all things that borrowers can do over the next few months,” says Dahlby.