I feel like I’m making quite a big decision here. Ever since I started documenting this journey, it has always been a goal to pay off debt, in particular, my student loans. 44 million borrowers here in the US collectively owe $1.7 trillion in student debt, and I am one of those borrowers.
I wanted to be NOT part of that statistic, so I planned and worked hard to make payments on my private and federal loans religiously. But here we are… I’m deciding to pause payments on my Federal student loans.
Why Do That?
The answer is very simple, really. Forbearance.
Back in March of 2020, to mitigate further financial struggles of borrowers caused by the pandemic, the CARES Act of former US President Donald Trump was passed. The forbearance would last till September 30, 2020, but would be later extended to December, 31 2020 and then extended again till January 31, 2021.
Currently, Biden is sitting in the office, and he has extended further the suspension of payments till September 30, 2021. This means that interest won’t start accruing and we won’t be making payments until October. Yay for us!
I’ve been looking ahead as to what I will do next when the forbearance ends this September and it got me thinking about this change. I sort of battled whether I should continue paying my federal loans with the extra money I’ll add to it once my private loans are paid off, or completely pause it until more substantial news about loan cancellation or forbearance extension comes.
What I’m Doing Next
I know it’s probably late for me to do this, but I still have around 5 months to take advantage of before the forbearance ends. That is $375 worth of payments that I could inject into my private student loans and get them out of the way sooner.
For this month, I’ve already added the $75 I make to my federal loans into my Sallie Mae account. The payment was made on April 18th. And the other 4 extra extra payments will be made on the last week of the succeeding months.
I’m not breaking my payments up for this because I never switched my federal loans into a weekly repayment strategy. If I cut it up for what I’m about to do, I’ll end up underpaying $30 by the end of it all. So, I’d rather not.
I’m still on the fence whether I should go all in on them especially when there are talks about loan cancellation. There are different scenarios I am considering right now when it comes to my federal loans, and what the government could be doing in the future.
We all know about the loan cancellation and the debate whether to cancel $10,000 or $50,000. There are even student debt experts saying that it is likely that Biden’s administration is going extend the suspension further than the current September end date.
On another hand, there are Democratic senators pushing for a fourth stimulus check to help more Americans. As to how much that would be or when that’s going to happen, I don’t know. President Biden still hasn’t shown support to that matter, as far as I know, since it’s not part of his long-term economic plan.
All those things matter because they will affect me and the way I will be handling my money. But for now, let’s just talk about the loan cancellation and extension.
So, if $10,000 were cancelled, that’s cool. I’ll still be left with around $2,000, but that is manageable.
If $50,000 were cancelled, even better. I’ll be completely free from the shackles of student debt and I can finally focus on building wealth!
But $50,000 is unfortunately, unrealistic in my opinion. Even Biden knows that, and he has already shown support for the $10,000 cancellation. So, I’m placing my bets on that amount instead. He did, however, inquire to the Department of Education if he has the power to sign off $50,000, but that is still yet to be determined.
If there is another extension before the cancellation, then I will still pause on making any payments because the money could be better used somewhere it can generate more money like in my business, stock portfolios or other investments.
Everybody paying off student loans right now are basing their repayment strategies off the possibilities of a student loan cancellation. This is why the matter is so important to a lot of us. If it happens, then it’s a big relief to many borrowers. If not, it will change plans and make payments harder under today’s economic environment.
