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The End of the Student Loan Payment Pause Thumbnail

The End of the Student Loan Payment Pause

The first week of June brought a heightened sense of concern with the first-ever US default almost becoming a reality. With a bipartisan billed signed by President Biden on June 3rd avoiding default, many Americans will now be anticipating the mandate to resume paying their student loan payments.  

When the covid-19 pandemic was in full force March 2020, the government was doing everything in its power to lessen the blow to the economy and its citizens through stimulus checks, forgivable business loans, additional child tax credits, pausing student loan interest accrual and required payments, and many others. Of all of the covid-19 stimulus, student loan repayment has been kicked down the road more than any other. Spanning back to President Trump, who extended it twice, and President Biden extending it an additional 6 times.

With the debt ceiling bill blocking any further extension, the student loan pause is now scheduled to end on August 29th. At that time Federal student loan interest rates will revert back to their pre-pandemic fixed amounts and will begin accruing interest. While interest may begin accruing immediately, it’s likely that the first payment will not be due until September or October this year. The Education Department will need time to generate statements for 40 million borrowers who have not made a payment in over 3 years.

For those borrowers who were in default of their student loans before the pandemic and did not make any payments over the last 3 years, the Biden Administration has created the Fresh Start program which is not affected by the debt ceiling bill. The Fresh Start program allows those in default an additional year to begin payments and avoid collections as long as they stick to the guidelines of the program.

While the student loan pause officially comes to an end, Biden’s student loan relief remains in limbo. The estimated $400 Billion in forgiveness previously seemed all but certain, but now looks more and more unlikely with a recent bill passing both the Republican-led House and Democrat-led Senate to reverse Biden’s executive order on debt relief. The Supreme Court is expected to weigh-in in the near future.

This brings up two important pillars of financial wellness. The first being a safety net and living below your means can bring peace of mind in uncertain times. You’d much rather reduce your savings than have to begin paying your student loans with credit cards. And the second is that change is very, very hard and having a plan can help guide difficult decisions. Three years is a long time with many borrowers likely changing jobs, moving, purchasing homes, getting engaged, married, or having children, and much more. Those who had a plan on how to address their student loans amidst the pause are likely to be in a much healthier financial position than those who decided to begin spending those dollars. If you do not have the time, ability, or temperament for managing your finances, it may be time to consider working with a qualified professional to build a plan for the future.

To learn more or to discuss your investment needs. Please reach out to us at 219-465-6924 or through the Contact Us page on our website.


Mark Rosinski, CFP®, CPA

Wealth Advisor



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