Why it’s a good time to pay on federal student loans

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ALBANY, N.Y. (NEWS10)- Federal education loans have been automatically suspended for the next six months. The forbearance was part of the CARES Act and exempts individuals with a federal student loan from payments through the end of September.

The interest rate on federal education loans has also been dropped to 0%, so interest will not accrue during the forbearance period. This makes it a good time to continue paying on a loan.

If you wish to continue paying your loans during the administrative forbearance period, or to pay more or less than your regular payment amount, you are free to do so…Continuing to make payments during the administrative forbearance could help you pay down your loan balance more quickly because the full amount of a payment will be applied to principal once all interest accrued prior to March 13, 2020, is paid.

https://studentaid.gov/announcements-events/coronavirus

Even if the amount is smaller than the regular monthly payment, all money paid will go directly to the principal balance. There is a catch though- all prior accrued interest on the loan must first be paid before any payments are applied to the principal.

Automatic withdrawals have been put on hold. Those wishing to make payments should go the website of their loan holder to schedule a one-time payment. This will have to be done for every payment made through September.

Copyright 2021 Nexstar Media Inc. All rights reserved. This material may not be published, broadcast, rewritten, or redistributed.

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