AUGUSTA, Ga. (WJBF) – Because of the Coronavirus pandemic, federal student loan payments were paused in March, with no consequences to borrowers. The federal student loan moratorium is now scheduled to end January 31st.
“Essentially, interest rates were set to 0 percent,” Andrew Pentis, senior writer for Student Loan Hero said. “The promise was made that if you had a federal student loan, and it was eligible for this program, not making payments would not penalize you in any way, so there wouldn’t be any negative impact on your credit report.”
The Biden Administration has proposed a potential $10,000 federal student loan forgiveness plan, as well as an extension on the payment pause.
“That would be a huge wave of relief for millions of student loan borrowers because millions of student loan borrowers in this country have a balance of $10,000 or less, so it would completely extinguish their debt,” Pentis said. “Even for those borrowers who currently have more than $10,000 worth of student loan debt, and many borrowers do, many borrowers have six figures of student loan debt, even for them it would make a nice dent in their debt so their balance would shrink. Their monthly payment would shrink right along with it, and hopefully their monthly payment and payment overall would become more manageable.”
The proposed $10,000 federal loan forgiveness plan could have a big impact on Georgia. In a recent study, Georgia ranked third in highest student loan debt by state, with an average balance of just over $39,000. This is 7 percent higher than the U.S. average.
But Pentis says it would not be wise to hold out on making a plan to pay back your student debt in hopes of the forgiveness plan or an extended moratorium.
“The Biden Administration for example, yesterday came out with a stimulus proposal and that $10,000 student loan forgiveness policy idea was not included,” Pentis said. “Even if this forgiveness or something like it does come to fruition in the future, it’s likely that borrowers will have to wait some time, and therefore, the best thing you can do is figure out what’s the best thing you can do for your payment instead of just waiting on massive relief.”
While there is speculation on what the Biden Administration may do, as of right now, the payment pause is set to end January 31st.
“The Biden Administration has come out and said it will extend the moratorium on day one of its administration,” Pentis said. “It just remains to be seen exactly what the details of that would be, when the moratorium would be extended to, and whether additional federal student loan borrowers would become eligible for it.”