Student loan payments are not due until September. Here’s what borrowers need to know – CNBC | Vette Leader

The Biden administration has been grappling with ending the pause in loan payments as the economy recovers from the pandemic lows.

Jose M. Osorio | Tribune News Service | Getty Images

The US Department of Education has extended the pause in payments on federal student loans for the sixth time since the pandemic began more than two years ago.

This time, borrowers were told they would not have to pay their bills again until September. So, here’s what borrowers need to know.

Student loan forgiveness could still happen

Despite improvements in the economy since the federal student loan pause was first announced in March 2020, President Joe Biden said it was too early to ask borrowers to start making payments again.

“We are still recovering from the pandemic and the unprecedented economic disruption it has caused,” Biden said in an April 6 statement announcing the latest pause.

Meanwhile, the latest delay is announced as the White House is still deliberating on student loan forgiveness.

Biden is under intense pressure to pay off some of the country’s $1.7 trillion outstanding education debt. Senate Majority Leader Chuck Schumer, DN.Y., and Sen. Elizabeth Warren, D-Mass., are urging him to cancel $50,000 per borrower.

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Nearly 66% of likely voters support the president forgiving student debt, with more than 70% of Latino and Black voters in favor, a recent poll found.

White House Chief of Staff Ron Klain said last month the administration wanted to reach its decision on forgiving loans before halting payments again.

“The President will review what we should do with the student debt before the hiatus ends, or he will extend the hiatus,” Klain said on the Pod Save America podcast in early March.

The break could be extended again

With the payment pause extended so many times, experts say borrowers are unlikely to take the recent announcement of September’s resumption of bills too seriously.

“What else is a borrower supposed to believe or plan to do when the government keeps changing its mind?” said Scott Buchanan, executive director of the Student Loan Servicing Alliance, a trade group for state student loan servicers.

And this time, the payments are set to restart just months before the midterm elections, which many observers said could trigger worrying headlines for Democrats and lower turnout for the party.

“I can’t imagine them resuming repayment two months before an election,” said higher education expert Mark Kantrowitz.

Most loans do not bear interest

Interest on federal student loans in the Direct program remains suspended. During the pause, borrowers saved nearly $200 billion, the Federal Reserve has found.

However, holders of Federal Family Education Loans and personal student loans are not covered by the policy, meaning their debt will continue to grow as interest rates rise.

It makes no sense for some to keep paying

Borrowers who can afford to pay may choose to take advantage of the interest moratorium to pay off the bulk of their student debt. But there are exceptions to this strategy, experts warn.

If you’re seeking government loan forgiveness or have an income-based repayment plan, continuing to make payments is a bad idea, experts say.

That’s because the months of payment pause count towards any debt relief these programs result in – whether you pay or not, and therefore any money you put on your loans during that period only reduces the amount of the edict for which you will eventually be entitled.

In the meantime …

Additionally, the Covid-19 pandemic has shown us the importance of resorting to a healthy savings account, experts say. People should try to build up savings for at least six months for emergencies, they say.

With interest rates on most government student loans at zero, it can also be a good time for people to make strides toward paying down more expensive debt. The average interest rate on credit cards is currently more than 16%.

But you should make sure you have enough in your emergency savings account before dealing with credit card debt, said Ted Rossman, industry analyst at

That’s because you shouldn’t rely on your credit limit as a safety net.

“Many people unexpectedly reduced their credit card limits over the past year because lenders were particularly concerned about the risk,” Rossman said.

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