By Alexandra White

Miranda Haymon, 26, made $37,000 a year as a theater director at the height of the pandemic. She was relieved when the U.S. The Department of Education automatically suspended federal student loan payments in March 2020. 

A few months later, Haymon was offered a new job as a producer at Audible. She is now making $200,000 a year. 

“My relationship with student debt completely changed because my income is now so high,” said Haymon.

She paid down her $2500 private loan but has still not paid her $25,000  federal loan because she thinks Biden will cancel student debt. 

Haymon could take advantage of low-interest rates and pay off her federal student loans, but whether she should pay depends on three factors. 

Borrowers who were not financially devastated by the pandemic and saw their financial situation improve after a year of lockdown should not pay their student loans if they are burdened by a private student loan or credit card debt, are saving for a major life event, or are participating in a public service loan forgiveness program.  

Federal student loan borrowers who have private loans or credit card debt should not pay off their federal loans and instead pay down other debt that has continued to accrue interest during the pandemic. 

“This is a wonderful time for them to pause, use the forbearance to take that added cash flow every month and put it towards their other goals,” said Leland Gross, a financial planner at PeaceLink Financial. 

If a borrower is interested in purchasing a home or saving for a second child, they should consider saving the money that would go towards monthly payments. 

Borrowers who qualify for student loan forgiveness should not make any payments during the pandemic. 

The public service loan forgiveness program forgives any remaining debt after making 120 payments after 10 years as a full-time public service employee.

The months you are not making payments during this special forbearance period still count towards the total number of payments you need to make before your loans are forgiven,” said Matt Eliott, a financial advisor at Pulse Financial Planning. “So if you are making payments now, you are just reducing the amount you will ultimately end up having forgiven anyways”

Borrowers who are part of a public service loan forgiveness program should request a refund because $0 payments count towards the 120 payments needed. 

Natalie Hartog, 24, is a public librarian for the city of Philadelphia who did just that. Her financial situation improved during the pandemic and she used her stimulus checks and excess savings to pay down the principal by $8,000.

A few months later, Hartog found out that she qualified for the public service loan forgiveness program. She asked for a refund and put the remaining $8,000 into a Roth IRA account.

It is notoriously challenging to get admitted to the public service loan forgiveness program. Of the 168,197 applications submitted between November 2020 and April 2021, only 2% were approved.

The US Department of Education temporarily expanded eligibility through October 31, 2022. Borrowers who have older loans that initially didn’t qualify are now eligible and borrowers can count payments from federal loan types and payment plans that were previously not eligible.

An estimated 550,000 borrowers are now closer to student loan forgiveness, said the US Department of Education.

For borrowers who are not eligible for loan forgiveness programs, have robust savings and are not in a large amount of debt, paying off their student loans while interest is at 0% would improve their financial situation.

For example, if a prospective homebuyer was denied a mortgage because he has a high debt-to-income ratio, he should pay down the principal while interest rates are at zero to eventually qualify for a mortgage.

“They have the freed up capability to really tackle their loan in a period of time where interest isn’t working against them,” said Gross.

Similarly, borrowers who have federal loans with high-interest rates should take advantage of this time period to pay down the principal before interest rates increase next year. 

“If you have a mix of federal student loans that have lots of different interest rates, you should be thinking about how you can make the biggest impact not just across your whole loan balance but on specific loans that have higher interest rates,” Ethan Miller, a financial advisor at Planning for Progress.

Haymon is neither in a considerable amount of debt, saving for a big life event nor a loan forgiveness program. She should pay off her student loans while interest rates are at zero. Still, she expects President Biden will cancel student debt. 

“What if they say they’re going to cancel $5,000 and then I wasted $5,000,” said Haymon. 

Although progressives in the House and Senate have lobbied President Biden to cancel student debt, there is currently no plan to eliminate it. Borrowers should not consider a non-existent policy into their repayment plans. 

“It’s not a great strategy to count on forgiveness coming when there have been no signs that we actually could expect that at any point,” said Miller.“If some forgiveness comes along the way it’s a bonus.”