PFT #59 - Personal Finance Tip of the Week: Student Loan Moratorium and Future Payments

<p><span style="font-weight: 400;">This week’s topic is about student loan moratorium.</span></p> <p><span style="font-weight: 400;">The federal student loan moratorium has been extended for the third time due to the Coronavirus pandemic.</span></p> <p><span style="font-weight: 400;">The loan relief began in March of 2020 and was set to end September 30, 2021 which was moved to</span> <span style="font-weight: 400;">January 31, 2022 and then moved again to May 1, 2022. </span></p> <p><span style="font-weight: 400;">Moratorium means that payments for</span> <span style="font-weight: 400;">principal or interest</span> <span style="font-weight: 400;">are not required and without any penalty.</span></p> <p><span style="font-weight: 400;">With the suspension payments, we know this is needed for many Americans; however, the important notion is to consider making payments if you have the means to do so.</span></p> <p><span style="font-weight: 400;">The simple fact is that you are delaying payments which only extends the life of your loan. </span></p> <p><span style="font-weight: 400;">So let’s take the average student loan interest of 6% and the average loan amount of $30,000 for a 20-year period.</span></p> <p><span style="font-weight: 400;">That comes to $215 per month or $5,600 over the full moratorium period which is currently 26 months. After this duration, you’d still have a principal balance of $28,201. </span></p> <p><span style="font-weight: 400;">The bottom line is that it takes a long time to pay loans off and they are simply a sword in the sides of borrowers. However, amortization is weighed heavily on interest at the beginning of the loan so all payments help, especially additional principal. </span></p> <p><span style="font-weight: 400;">The second point is you should not rely on congress for loan forgiveness as the odds are small. Just $10,000 given to each borrower would cost the government over a quadrillion - and if you don’t know that’s a 1 with 12 zeros after it. </span></p> <p><span style="font-weig