PHOENIX – As the coronavirus pandemic stretches for months, federal student loan payments have been suspended until September 2021. In addition to the hiatus, lawmakers, including President Biden, have discussed plans for eliminate existing student debt.
It was a campaign pledge to help Americans overwhelmed with debt, but the initial $ 50,000 that was discussed keeps dwindling.
When asked on Feb. 16 at a CNN town hall how he was going to work to erase $ 50,000, President Biden said he was not working towards that number, instead, supporting 10,000 $ in loan forgiveness.
“There are nearly 15 million borrowers with loans of less than $ 10,000. So Biden’s proposal could wipe out their debt altogether,” said Anna Helhoski, student loans expert at Nerdwallet.
Helhoski explains why it can be disappointing for some, people with this amount of debt often start college but never reach a degree. This leaves them without a better paying job in most cases to pay for it.
The big question for many is whether you are waiting for that eventual forgiveness – regardless of the final amount – or if you are paying off your loan while payments are pending. The answer is tricky.
The $ 10,000 amount is not frozen and with payments on hold for the next seven months, lawmakers are under no pressure to act now.
While it is likely to pass, it could still be reduced by lawmakers with respect to who qualifies based on current income or even total debt. So here are some things to consider.
Making payments now can help you pay less over time.
“You can kind of, you know, start reducing that debt a bit without worrying about the interest,” Helhoski said.
However, this can put you at risk of reducing the amount of rebate you can get at the end of your 20 or 25 year repayment period if you are on an income-based repayment plan.
The good thing, if you don’t pay now you won’t be penalized and you can put money into an emergency fund in case you lose your job or something else unexpectedly happens.
An important thing to remember is that the crooks are trying to profit from the pandemic. They make calls saying they can write off some or all of your debt by signing up for a debt relief plan with them. DO NOT share your information with them and NEVER pay for student loan assistance.
Instead, review one of these programs or contact your loan officer.