You don’t have to pay your federal student loans now, but here’s why you should
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Some of the American legislators extensive recovery efforts in response to the pandemic, federal student loan relief has been included, meaning borrowers do not have to make their student loan payments and will not be penalized for non-payment.
But if you have student debt and can still pay off the monthly loan, experts say you absolutely should.
Under the CARES Act, borrowers are not required to pay federal student loan payments and interest will not accrue on these loans. The temporary relief provided for by the CARES Act was initially provided until September, but has since been extended until December 31, 2020.
“Zero interest is a win-win solution for borrowers regardless of their financial situation,” said Anna Helhoski, student loans expert at Nerdwallet.
Having said that, if you are able to afford the monthly payment, there is one major reason you should keep paying.
All federal student loan borrowers benefit from the CARES Act interest suspension, which will help you pay off the loan faster.
“If you already have a rainy day fund and haven’t racked up any ‘bad’ debt (like credit cards or personal loans), consider continuing to pay off your student loans even if they do. are not needed, ”Brian Walsh, director of financial planning at SoFi, said.
Normally, part of a monthly student loan payment is used for interest, but under the CARES Act, the entire payment will go to the principal balance of the loan.
“If you can afford to keep paying off your federal loans, then it makes a lot of sense to do so,” Robert Humann, chief executive of financial services firm Credible, told CNN Business. “The more you owe, the more you can save if you continue to make your monthly student loan payments without interest. “
But, Helhoski said, “if your finances are in trouble and you need to take a break, do it.”
The CARES Act provides much needed relief to many borrowers. Students who have taken out loans owe an average of $ 32,731 – the average monthly payment being $ 393 – according to a 2017 Federal Reserve study.
People have to keep paying the principal and interest on their private student loans. US Department of Education has more information on the loans that are affected.
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