Student Loans Are On Hold — Should You Pay Anyway?

Federal student loan payments are suspended interest-free through Dec. 31, 2022.
Sep 16, 2022
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Payments are currently suspended, without interest, for most federal student loan borrowers through Dec. 31, 2022. This policy does not apply to private student loans.

Borrowers can still make payments to lower their debt during this period of suspended payments, called a forbearance. According to the latest federal data, a total of 500,000 borrowers (about 1.16% of all 42.9 million federal loan borrowers) continued making payments during the pause. Contact your servicer if you have further questions.

While the Biden administration has unveiled a broad cancellation plan for up to $20,000 in federal loan debt, any remaining debt will be waiting for you when repayment begins at the end of the forbearance, unless the policy changes again.

If your payments bring your federal loan balance below the amount of cancellation you qualify for — it's $10,000 for all borrowers who earn less than the income limits, and $20,000 if you have ever received a Pell Grant — the federal government will automatically refund the overpayment when it discharges your debt.

On the other hand, if you'll have a balance remaining, you may want to continue to take advantage of the 0% interest rate as long as you can. Every dollar you send goes straight toward the principal.

Here’s how to decide what to do next.

If you are seeking Public Service Loan Forgiveness

The automatic forbearance won’t undo your progress toward Public Service Loan Forgiveness, or PSLF. As long as you are still working with a qualifying employer, months spent in forbearance will count toward PSLF.

Making payments during the automatic forbearance won't get you ahead on payments. You're in the same boat whether you pay or not.

Under normal circumstances only full payments count. You also won’t lose credit for the payments you already made.

Once payments resume, you may want to review the new income-driven payment option that was unveiled in August as well. For many borrowers it will result in the smallest possible payment — and if you are on any kind of forgiveness track, that's your goal.

If you want to continue making payments

Borrowers might want to continue making payments on federal loans if they want to pay down their debt faster.

If you do continue making payments, you won't pay any new interest on your loans during the forbearance. This 0% interest rate will save you money overall, even though your payment won't be lower.

The full amount of your payment will be applied to the principal balance of your loan once all interest accrued prior to March 13, 2020, is paid.

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 at least Jan. 1, 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 debt (FFELP), you are entitled to receive the no-interest forbearance only if the government owns the loans. This won’t be most FFEL 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.

The only way to get the forbearance — or cancellation — for commercially held FFEL loans is to consolidate your debt into a new federal direct loan. But there are downsides to consolidation:

  • Your repayment term will be extended.

  • Your interest rate will increase slightly.

  • Any unpaid interest will capitalize and be added to the total amount you owe.

Temporary interest-free payments may not be worth those additional long-term costs, but the discharge of as much as $20,000 in debt might be.

However, if you were already making payments on an income based-repayment (IBR) plan, those previous payments will no longer count toward forgiveness. You’ll have to start all over.

Consolidation can make sense if you have FFELP loans and want to qualify for Public Service Loan Forgiveness. Otherwise, stick with your current loans.

How to work with your servicer

If you want to restart payments during the automatic forbearance, contact your student loan servicer — it’s the private company that manages payment of your federal loans. But you don't have to do anything to get the forbearance or the 0% interest rate.

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.

For additional information visit studentaid.gov/announcements-events for forthcoming details.

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