Federal Student Loans & Parent PLUS Loan UPDATE
8/10/2021
Federal Educational Student Loans, Parent PLUS Loan UPDATE
The federal government just announced an extension to the currently deferred federal student loans.
“Federal student loan repayment suspension and 0% interest rate have been extended through at least January, 31 2022.”
Back in March 2020, the federal government began providing temporary relief on ED-owned federal student loans: suspension of loan payments, stopped collections on defaulted loans, and set a 0% interest rate.
Basically, this means, if you have a federal student loan, no interest will accumulate during the deferral period and the current interest rate is temporarily set to zero % and no payments are required during the relief period.
If your student is starting college in the next few weeks or continuing college this fall 2021, accepting the federal student loans might be something to consider.
Here is my reasoning on this.
The maximum amount of federal educational loans that a college freshman will be offered is $5500. Within this, two loans could be offered, the Federal Subsidized Loan and the Federal Unsubsidized Loan.
Under normal conditions, both loans are deferred, meaning no payment is required during the deferral period. Typically, these loans are deferred for 4 1/2 years. The thought is, the student takes 4 years to graduate college, then takes six months to find a job, then payments for these loans begin.
During this deferral period, no interest will accumulate for the Federal Subsidized Loan. Interest will accumulate during the deferral period for the Unsubsidized loan.
With this current moratorium, the unsubsidized loan acts like the subsidized loan and no interest will be added to the loan during this temporary pause.
If you had the money to pay for college and did not need any of these loans, it might be something to consider accepting these loans, at least temporarily. Then on February 1, 2022, pay off the loan when the moratorium expires. During the next 5-6 months, keep the money that you were going to pay for college in an interest-bearing account. Pay the loan off and keep the interest.
Loans that are currently in this temporary pause are: Federal Student Subsidized Loans, Federal Student Unsubsidized Loans, Federal Parent PLUS Loan, Graduate PLUS Loan.
See for more info https://studentaid.gov/announcements-events/coronavirus
If you have questions on any of these federal student loans or would like to discuss some strategic planning to get into college, get scholarships and grants and or plan on how to best pay for college, or if you should or should not take out student loans, please contact me. 1-888-237-2087 x2.
