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Should You Keep Up Payments During the Federal Student-Loan Freeze? Experts Weigh in

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"Not a single person in this country has paid a dime on federal student loans since the president took office," former White House press secretary Jen Psaki said in a recent press briefing, referring to the suspension of interest on the debt.

In fact, some borrowers, such as Lea Ceasrine, 28, have kept up their payments all along.

For them, this 30-month moratorium has offered a rare opportunity to make some headway on their loans while no interest accrued.

Ceasrine originally took out a mix of private and federal student loans to pay for her bachelor's and master's degrees and graduated with a loan balance near $70,000.

"During the pandemic, I made it my goal to pay down my first loan," Ceasrine said. Not only the did the Chicago-based podcast producer focus solely on her student debt, but she also beefed up her payments. 

Over the last two years, she brought her outstanding balance down to $54,000.

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Roughly 1.2% of borrowers have kept up payments and chipped away at their loan balances during the extended student-loan freeze, according to student loan expert Mark Kantrowitz, based on repayment data from the U.S. Department of Education. 

Those outlays have also counted toward the 120-payment requirement for public service loan forgiveness, Kantrowitz noted, "effectively reducing the qualifying payment count by a quarter," he said.   

But now, talk of massive student loan forgiveness is back on the table, leaving these borrowers questioning whether further payments make financial sense.

Ceasrine said she only recently stopped paying as the debate around student loan forgiveness heated up.

"I was paying $1,300 a month, I wasn't putting anything else toward saving in order to make the maximum payment I could," she said. "I cannot sustain doing that."

Plus, Ceasrine said she's hopeful that there will be legislation to compensate, in part, for a system that largely failed her.

"For the students put in a precarious situation, it's necessary because we are still at the lower end of the economic ladder and we have not been able to climb up," Ceasrine said.

"I went to school as a student with no financial support," she explained. "I took out my first loan at 17 for a college experience that was of no value to me."

After graduating, "I didn't make enough money to pay it back."

Although President Joe Biden has expressed skepticism about sweeping student loan forgiveness in the past, he recently indicated he may, in fact, provide some form of student debt cancellation, according to multiple reports.

"It really does shift the onus on the president to make his plans clear sooner rather than later," said Whitney Barkley-Denney, a senior policy counsel at the Center for Responsible Lending.

"There's a time crunch here," Barkley-Denney said. "People need to make plans for how they are going to handle this loan debt going forward."

Is it time to stop making payments?

"I would not recommend paying federal student loans at this point," said Brian Leslie, director of financial planning at Edelman Financial Engines. 

"We don't know whether or not we will ultimately get to a point of student loan forgiveness, but for right now the cost of playing the 'wait-and-see game' is essentially nothing."

However, it is important to remain disciplined, Leslie said.

"If you're taking your funds that would otherwise go towards student loans and using it to buy new jet skis or some other depreciating asset, that's likely not the best use." 

Consider putting the money toward savings or use it to pay down other outstanding loans, he advised.

"If you have an employer retirement plan and you're not contributing fully to receive the match, that's the first place I would go with those dollars." 

Alternatively, set some funds aside in a high-yield savings account. "If we get to a point where forbearance ends and forgiveness is unlikely, you can always take the money that you've accumulated and apply a lump sum toward those student loans," Leslie said.      

Loan forgiveness remains a long shot, according to Laurence Kotlikoff, professor of economics at Boston University and the author of "Money Magic."  

"The president doesn't have the power to unilaterally cancel student debt," he said. "He can't just wave a magic wand."

According to Kotlikoff, Congress would have to pass a student loan forgiveness bill and without 60 votes in the Senate, "I don't see a path for canceling student loans unless somebody knows something I don't."

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