, which included several measures to help American citizens facing financial difficulties due to the ongoing Covid-19 pandemic.
At the time, the pause on student loan payments was only set to last until September 2020. But in August it was extended through December. Then, in December, it got extended again through January 2021. And then Biden extended it again through September 2021.
So, we’re sure you by now you have at least some idea of what administrative forbearance means. But, since Biden’s executive order just extended this plan again through January 2022, let’s do a quick refresh.
You don’t need to make any payments on your federal student loans owned by the Department of Education
Your balance won’t go up because, for the time being, there’s a 0% interest rate on your federal student loans
None of this applies to private student loans
Now, having your student loans in administrative forbearance is great for taking those monthly payments off your list of things to worry about. The only problem: it’s a temporary solution.
Is it likely that the pause on student loans will be extended again?
Nope — at least not right now. The Biden administration has said this latest extension is the last. And the Department of Education wants borrowers to use this time to prepare for when payments resume next year.
Now, as you know, the student loan debt crisis isn’t going to magically disappear before or after January 2022. But there is still some hope that a more impactful change might be coming soon…
Potential plans to forgive or cancel some student loan debt
Forgiving $10,000 of federal student loans per borrower, regardless of income
Revising the federal student loan income-based repayment plans so that: 1) borrowers making over $25,000 per year only have to make monthly payments that are 5% of their discretionary income 2) borrowers making $25,000 or less per year don’t have to make any payments on their
undergraduate federal student loans and also won’t accrue any interest on those loans
Canceling federal student loans that are tuition-related for people who graduated from public colleges, historically black colleges and universities, or minority-serving institutions, and who earn less than $125,000 per year
Creating a new program that offers $10,000 of undergraduate or graduate student debt relief for every year of national or community service, up to five years
Forgiving the debt held by individuals who were deceived by the worst for-profit college or career profiteers
To date, Biden’s only acted on a few of those initiatives, directly cancelling
What is sure, though, is that some politicians don’t think Biden’s plans go far enough to help borrowers struggling with debts. Can you guess which politicians?
What other politicians think about Biden’s plans to address the student loan debt crisis
When you hear the words “cancel student loans”, who comes to mind? For many, it’s the Democratic politicians who have helped popularize this idea. You know, people like Senator Elizabeth Warren, Senator
It’s simple: When people have more money to spend, our whole economy is better off. The Biden-Harris administration can put more money in people’s pockets by using their existing legal authority to cancel student loan debt for millions of Americans.
to cancel student loan debt even if he wanted to. And without executive action, it’s pretty unlikely to happen.
Still, there is hope for the $10,000 forgiveness plan. And if that’s close to the amount you currently owe, the question “should I continue paying my student loans?” becomes all the more important.
Should you pay off your student loans or wait for forgiveness?
With all this talk about student loan forgiveness, it’s understandable that you might be thinking about waiting to see what happens before you make another payment. But should you? Well, it depends…
For one, if you owe over $10,000, then it’s probably a good idea to keep making payments on your student loans. As we mentioned already, it’s highly unlikely that the Biden administration will cancel all of your student loan debt.
And, it’s definitely a good idea, if you can, to take advantage of the 0% interest rate during the forbearance period. Doing so will help you
even faster since you’d get to make payments directly toward your principal balance.
If, however, your student loan balance is below $10,000, then that’s a decision only you can make. You could wait and see what happens. But, if you do, just make sure you’re prepared to potentially start making payments again once the current forbearance period ends in January 2022.
With Biden now in office, the student loan debt crisis looks like it might finally be addressed on a national level. But that doesn’t mean you should expect all of your student loan debt to go away.
For now, it looks like there’s a good chance $10,000 of student loan forgiveness per borrower could happen soon. And things like a restructuring of income-based repayment plans, and debt relief programs for particular groups could follow.
In the meantime, you’ll need to decide if continuing to make student loan payments makes sense for you. And if you need some extra help, be sure to check out