Student Loan borrowers are currently experiencing unprecedented times. Interest and payments for almost all federal student loans have been on pause for the last two years. The current student loan system is undergoing serious changes due to the Biden Administration making edits to the established rules, and even hinting towards the total cancelation of student debt.
The current state of the student loan system is causing many borrowers confusion as to what they should do. While there is no specific answer as to what borrowers SHOULD do, there are some specifics that borrowers should avoid until the current moratorium ends in September.
Paying Off Student Loans Before September
It is not necessary for any borrowers to pay off their loans until at least this upcoming September. According to the CARES act, the most recent moratorium made by the president does not officially expire until August 31, 2022, and there have also been rumors that this moratorium will be further extended once the expiration date arrives. There is no harm in waiting to see what happens in September because the interest rate on the loans is currently at 0%.
Refinancing Student Loans
One of the main reasons a borrower will refinance their student loans is to lower the interest rates of the loan. This is unnecessary due to there being no interest rates on federal student loans. It can also be potentially harmful at this time because a private lender is required. The requirement of a private lender will ultimately force the borrower to walk away from the federal benefits of the student loan system, one of them being the possibility of total forgiveness.
Ignoring News on Student Loan Forgiveness
The Biden Administration has been rapidly making changes to almost every federal student loan protection program in the country. While some of these changes are automatically implemented, some of them require the borrower to take action. Staying as up-to-date as possible will help borrowers understand the steps they have to take that can ultimately end up being extremely beneficial.
Wrap Up
With new rules being implemented so frequently, it can be hard to keep up with all the information about federal student loan forgiveness. Be on the lookout for future articles about to the student loan moratorium, and give your accountant or advisor a call if you have any questions regarding federal student loan payments.