Student Loan Forbearance: Should You Make Payments Anyway?

Federal student loan payments are on hold, and interest is suspended until September 2021 for most government loans.

This suspension, also called forbearance, does not apply to private loans. However, borrowers who can continue making payments may want to consider doing so.

By continuing to make payments, borrowers can continue making payments to put more money toward the loan principal. Since interest is on hold until September, borrowers can continue to make payments to pay down loan debt earlier.

During this forbearance, borrowers will not pay any new interest on student loans. While the cost will remain the same overall, the 0% interest rate will help borrowers save money in the long term.

Although the Biden administration has said that it plans to push to expedite $10,000 in loan forgiveness for federal borrowers, it appears there may be the opposition that could hold up any action on a loan forgiveness bill.

How to decide

How should borrowers decide whether to continue with their federal loan payments during forbearance?

If you are a borrower who plans to seek Public Service Loan Forgiveness, you should not make payments until the forbearance lifts on September 30, 2021. The months that the loan is forbearance will be counted toward the 120 payments required to receive loan forgiveness.

If you are a borrower in an income-driven repayment plan, planning on paying on the loan until the loan is forgiven, holding off on making payments may be the best bet. Loan forgiveness usually takes 20 to 25 years.

However, individuals aiming to pay off loans sooner may want to make payments to help lower the total amount of interest owed.

For borrowers on a standard repayment plan, making payments may be the right choice.

Loan advisors recommend that borrowers make their regular payments to their own savings account. This account balance allows for some flexibility. Then, when loan forbearance is canceled, a large lump-sum payment can be made to the loan with the highest interest.

Consult your loan servicer

Borrowers considering restarting their loan payments during the period of forbearance should contact their student loan servicer.

Loan servicers are private companies that manage payments to federal student loans. They are available to answer questions or help clarify the terms of your loan.

For more information to go — you’ll need your FSA ID. Information about all federal student loan servicers can also be accessed at 1-800-4-FED-AID.