Student Loans Are On Hold — Should You Pay Anyway?

Student loan payments are currently suspended, without interest, for most federal borrowers until late summer 2023. The repayment clock is set to restart 60 days after the Supreme Court rules on President Biden's student debt cancellation, or 60 days after June 30, 2023 — whichever comes first.

Borrowers can still make payments to lower their debt during this period of suspended payments, known as forbearance. But they don't have to. About 500,000 borrowers (roughly 1.16% of all 42.9 million federal student loan borrowers) have kept paying during the pause, according to federal data.

» MORE: Forgiveness, forbearance and other student loan changes to know

While the Biden administration has unveiled a broad student debt cancellation plan of up to $20,000 per eligible borrower, any remaining debt will be waiting for you when repayment begins. And that's assuming the Supreme Court rules in favor of the plan. (A decision is expected by late June 2023.)

» MORE: Supreme Court student debt cancellation cases: 4 expert takeaways

Here’s how to decide what to do in the meantime.

If you owe more than the debt cancellation maximum

Borrowers might want to continue making payments on federal loans during forbearance to pay down their debt faster. This is a good idea for borrowers with balances above the debt cancellation threshold — $10,000 for all eligible borrowers and $20,000 if you have ever received a Pell Grant — because you'll have to pay that leftover amount in the future regardless of the Supreme Court's ruling.

The full amount of your payment during forbearance will be applied to the principal balance of your loan, once all interest accrued prior to March 13, 2020 is paid. Take advantage of the 0% interest rate as long as you can to avoid future interest charges.

If you owe less than the debt cancellation maximum

If you owe less than $10,000 (or $20,000 for Pell Grant recipients), consider putting money aside money in a high-yield savings account during forbearance. If the Supreme Court strikes down Biden's plan, you can use this money to make a lump-sum payment to reduce the interest you'll eventually owe once forbearance ends. And if debt cancellation succeeds, you can use these savings for something else.

But if you do make payments during forbearance that bring your federal loan balance below the amount of cancellation you would qualify for, the federal government will automatically refund the overpayment when it discharges your debt.

If you are seeking PSLF or IDR loan forgiveness

The forbearance won’t undo your progress toward Public Service Loan Forgiveness or other income-driven repayment loan forgiveness programs. As long as you're still working with a qualifying employer, months spent in forbearance will count. (Under normal circumstances, only full payments count.)

So, making payments during the automatic forbearance won't get you ahead on payments. You'll have the same payment count when the federal forbearance ends, whether you pay during the pause or not.

You also won’t lose credit for the payments you already made before the pandemic payment pause. In fact, the income-drive repayment account adjustment, or waiver, announced in April 2022 could actually increase your payment count toward forgiveness.

Once payments resume, you may also want to review the new income-driven payment plan that is scheduled to start rolling out in late 2023. It could halve payments for many borrowers.

Other factors to consider when deciding to pay during forbearance

Deciding whether to make a payment during this time will depend on your original repayment strategy:

• Those sticking to a standard repayment timeline (typically 10 years) could consider making payments. You likely won't have much outstanding interest and additional payments can help you chip away at your principal during the break. To preserve your flexibility, we suggest opening a savings account and banking those monthly payments, then making a lump-sum payment against your highest-interest loan when repayment begins.

• Borrowers enrolled in income-driven repayment or planning to do so shouldn't bother making payments now if the ultimate plan is to pay until the loans are forgiven — usually 20 or 25 years. If you want to pay off your loans sooner, then paying now could help you lower the total interest you owe on top of your principal.

• Borrowers seeking Public Service Loan Forgiveness do not need to make payments until forbearance ends sometime in 2023. The months of automatic forbearance will count toward the 120 payments needed for forgiveness.

Contact your loan servicer with any questions about continuing or restarting payments during the forbearance period.

If you have FFELP loans

If you have Federal Family Education Loan Program (FFELP) debt, you're entitled to receive the no-interest forbearance — and potential debt cancellation — only if the government owns the loans. This won’t apply to most FFELP borrowers; most of the loans from the now-defunct program are commercially held.

You can find out who owns your loans by logging in to StudentAid.gov using your FSA ID.

Both federally and commercially held FFELP loans qualify for existing loan forgiveness programs — either PSLF or income-driven repayment — if you consolidate them into a federal Direct Loan. Normally, consolidation would be a strike against seeking forgiveness, as it would cause unpaid interest to capitalize and reset your payment count, wiping out any progress you'd made on an IDR or PSLF plan up to that point.

But neither of those downsides applies to borrowers who take advantage of the one-time IDR account adjustment (previously called a "waiver") that allows time in forbearance and some deferments to count toward income-driven loan forgiveness. Whether you have federal- or commercially held FFELP loans, you must consolidate by the end of 2023 to take advantage of this waiver. The account adjustments are scheduled to happen in the spring of 2023 into 2024.

You cannot consolidate into a Direct Loan if you already did a spousal consolidation — but a new 2022 law will allow you to split your spousal consolidation loan up again. The Education Department has not yet announced an application timeline for eligible borrowers.

How to work with your servicer

If you want to restart payments during forbearance, contact your federal student loan servicer — it’s the private company that manages your loan payments.

To find out which loan servicer is yours, log in to StudentAid.gov with your FSA ID.

You can get in touch with all of the loan servicer contact centers by calling 1-800-4-FED-AID.