Announcements made by the Biden Administration of late related to student loan payment deferrals, and the potential for some serious student loan debt forgiveness, on the horizon have paved the way for a key question among many with U.S. student debt: is now the time to start paying off my student loans, or should I wait to see how this plays out?
In Canada, there are a number of debt forgiveness and deferral programs that have been in place for some time, and which many students already take advantage of. The extent to which the Federal government follows suit with some sort of similar debt forgiveness program enacted as a way to spur growth and stimulate the economy remains to be seen. Many with student loans right now may simply be on the fence with regard to making more than minimum payments, if some of that debt will be forgiven on the horizon.
The benefit of making additional payments right now is that less deferred interest will accrue on one’s loans. While a portion of one’s loan may be forgiven, it’s also less likely that the whole balance will be taken on by the Canadian or American government. By paying down one’s student loans faster, one also opens up the door for better disposable income levels sooner. Doing so can also improve one’s debt service ratio, which is a good thing if one is considering buying a property right now.
If one has a relatively small amount of student debt remaining, it might make sense to wait and see what happens here. Free money is free money, so waiting to see what happens can be prudent in the short-term. Over the longer-term, paying off one’s debt is always a good idea.
Invest wisely, my friends.
