Do you have federal student loans? If you are on the fence about refinancing before rates potentially increase, then things just got a little more interesting. There is news today that the Biden Administration might be looking to extend the pause on student loan payments again. 

News from the Biden Administration

According to CNBC the U.S Department of Education has directed loan services not to send out notices about payments resuming in May. These notices would have been sent out at the end of this month originally. This could be a sign the payment pause will be extended again. Keep in mind that it is not clear how much additional time, if any, might be granted to these borrowers. There are also signs that the president is looking to decide on student loan debt cancellation. President Biden suggested cancelling $10,000 per borrower in his campaign. But some Senators have been pushing him to cancel up to $50,000 for each borrower. 

The Biden Administration has made efforts on several fronts to relieve student loan debt. According to an article on CBS News, “thousands more people could soon have their student loan balances wiped clean”. This refers to about 30,000 additional borrowers who are working towards PSLF. While this may not affect you directly, it is part of a pattern of this administration’s plans to reduce student loan debt. 

Can I still apply for the PSLF Waiver?

Yes! If you currently work for, or worked in the past for a PSLF eligible employer and were technically in repayment during that period of time, you might be eligible to apply the terms of the PSLF Time-Limited Waiver before October 1, 2022. 

Since the PSLF Waiver, nearly 70,000 borrowers have had their loans forgiven through PSLF with another 30,000 who could soon qualify. If you have questions about whether you might qualify for PSLF, please consult a CSLP (Certified Student Loan Professional) as soon as possible.

What does the news about student loan payments potentially being paused again mean for you?

Well nothing yet. But, if you are considering a refinance before rates potentially increase, then you have another factor to consider. On one hand, interest rates were expected to rise .50% in March, 2022 with another 3-6 more rate hikes in 2022. But, recent events have led to increased volatility and inflation which may alter these plans. Only you can decide if the time is right for you to refinance. Refinancing at this time will most likely lower your interest rate and potentially the overall cost of your loans. 

Other options for borrowers

The other option is to keep your loans in the federal loan system. If the payment pause is extended another few months (maybe 3-6 more months) then borrowers could continue to save money to potentially pay down their debt in the future. Borrowers who stay in the federal loan system could benefit from potential loan forgiveness, if offered in the future. Keep in mind there are other ways this administration could help borrowers in the federal student loan system such as keeping interest rates low (or at 0%), creating a new Income Driven Repayment Plan that would only charge 5% of Discretionary Income (or similar), and/or extend the benefits of tax-free forgiveness for all IDR plans beyond the current 5 years. 

There are also risks of staying in the federal loan system, especially if you are considering a refinance. Namely, interest rates could rise while you keep your loans in the federal system hoping for additional benefits. Please calculate the potential costs when making your decision.