ELMIRA, NY (WETM) – As the COVID-19 pandemic began in late 2019, it entered an America that has suffered from a financial pandemic for years in the form of trillions in outstanding student loan debt . When the coronavirus took center stage, millions of people were put out of work and the burden of student debt rose on millions of Americans.
Last week, on his first day in office, President Biden called on the Education Department to extend the moratorium on federal student loan payments until at least September 30. This extension of payments offers crucial relief to those still struggling to make ends meet in the COVID-19 world. However, one important thing to remember is that interest rates have also been suspended since the moratorium came into effect early last year. Student loan borrowers can use this to their advantage – that is, if they can afford it.
18 News spoke with Matthew Burr, financial expert, owner of Burr Consulting and author, about the pause on student loan payments and what it means for borrowers. “On federal loans, this is a great time to make payments because there is no interest accrued, everything is the principal at this point.” In the context of a loan payment, “principal” refers to the amount you actually owe. When you pay on principal, you are making direct payments and lowering the amount you owe, which is rarely the case since payments often go directly to interest only.
“If you can afford to make 100% interest free student loan repayments right now, you could make astronomical progress over the next 12 months on your loans.” Burr said. He also said that when it comes to any debt, you need to figure out where you can cut your spending. He said during the interview that he believes living debt free is the best way to live.