TEMPLE, Texas — The payment pause and interest waiver on Federal Student loans will soon be over starting early next year.
Starting in February, minimum payments will resume and interest will kick back in for more than 40 million Americans hold.
The Federal Government's repayment pause on federal loans has been in effect since March 2020 due to the pandemic, but what will happen now that payments will restart?
6 News' financial planner Rolandus Johnson gave us the scoop.
Johnson told 6 News, “I would say me personally, this is just kind of my opinion, just say, if you can knock out some of them without any interest, by all means do so. Because once that interest comes back it's going to hit and it's going to hit fast and furious in my opinion and so, again, and we come back to income wiggle room, if you have, the ability to do so, knock it out. And that could take a year or two, maybe three or five, years off of that student loan payment."
If you were able to make payments over the last 18 months, good for you. But if you're about to be hit hard by a new minimum payment starting up again, maybe it's time to take a different approach.
The Education Department said that we are in the midst of the "final extension."
Johnson told us that you still have choices, saying, "Refinancing is always going to be a great option. I think that the average is six to seven percent on student loans and if you can get that finance down to what the rates are now, maybe two, maybe what one percent? Man, that's going to take some time years off right there. And maybe out some money back in your pocket, refinancing is always a great option and if you aren’t already looking into it you're probably missing the boat on that."
Again if you have a private student loan you never got a pause in payment and interest. And that has been a hard thing this past 18 months for those in this situation.
Johnson told 6 News, "I think that we are going to be paying student loans just as long as we are paying our mortgage. So if you have the wiggle room to go ahead and knock it out go ahead and do so."
And if you were in default on your student loans, it takes nine on time consecutive payments to get out. And that should have happened for most borrows.
So now might be the ideal time to refinance and get back into paying your loans down.