ELMIRA, N.Y. (WETM) – While the COVID-19 Pandemic began in late 2019, it came into an America that has been suffering from a financial pandemic for years in the form of trillions in outstanding student loan debt. When coronavirus took center-stage, millions were put out of work and the weight of student loan debt got heavier on millions of Americans.
Last week, on his first day in office, President Biden instructed the Department of Education to extend the moratorium on federal student loan payments through at least September 30th. This extension of payments provides crucial relief to those still struggling to make ends meet in the COVID-19 world. However, an important thing to remember is that the interest rates have been paused too, and have been since the moratorium was first put into effect early last year. Student loan borrowers can use that to their advantage, that is, if they can afford to.
18 News spoke to Matthew Burr, financial expert, owner of Burr Consulting, and author, about the pause on student loan payments and what it means for borrowers. “On the federal loans, it is the perfect time to be making payments because there is no interest accruing it’s all principal at this point.” In the context of a loan payment “principal” refers to the amount you actually owe. When paying on the principal, you are making direct payments and decreasing the amount that you owe, which is rarely the case since payments will often go directly to interest only.
“If you can afford to make student loan payments right now on 100% principle without that interest you could make some astronomical progress over the next 12 months on your loans.” Said Burr. He also said that when it comes to any debt, you need to consider where you can make cuts to your expenses. He said during the interview that he believes living debt-free is the best way you can live.