Most people know that payments have been paused on the majority of federal student loans since March of 2020. Here’s how to take advantage of the last extension.
Most people know that payments have been paused on the majority of federal student loans since March of 2020. Interest rates on eligible loans have also been fixed at 0% the entire time, which has meant that people who can’t or don’t want to make payments on their loans haven’t been penalized so far.
This emergency deferment period was put in place as the result of Covid-19, and it has been extended multiple times, most recently through August 31, 2022. Yet, the current pause on payments and 0% interest period has just been extended by the Biden administration again, this time through December 31, 2022.
Of course, you have probably read that borrowers with incomes below $125,000 (or $250,000 for couples) are also getting $10,000 to $20,000 in federal student loan debt forgiven per borrower, with the higher amount going to those who went to college using Pell Grants.
Other benefits are in the works as well, including a new income-driven repayment plan that requires borrowers to pay 5% of their discretionary income in payments each month (instead of 10%) and updates to Public Service Loan Forgiveness (PSLF) that are meant to help more people qualify.
This is good news for borrowers who have a low amount of debt that could be wiped away completely by Biden’s loan forgiveness plan. However, everyone else will need to plan on making payments on their loans again come January 2023.
Fortunately, there are several steps borrowers can take to make the most of this extended deferment period through the remainder of the year. If you are wondering what moves you can make to improve your financial prospects until payments resume, consider these tips.
While interest rates on federal student loans are definitely on the rise for students who borrow during the 2022-23 academic year, individuals who already have federal student loans will pay the same rate they were paying before March of 2022 once federal student loan payments resume.
Regardless, it almost always makes sense to pay down high interest debt over federal student loans, which come with low fixed interest rates that never change.
