Don’t bother paying off your student loan debt now, advisers say

Financial advisors rarely recommend not paying off debt, but this time it’s different.

Since President Joe Biden was elected, millions of Americans in student loan debt have been waiting for him to fulfill his campaign promise to forgive at least $10,000 per borrower. As Biden recently extended the loan payment moratorium through August 31, pressure is mounting on the administration as the midterm elections approach.

As the White House mulls its options, questions swirl about how debt forgiveness would actually work: Would people earning more than six figures a year qualify for a rebate? When will it come into force? Will $10,000 be forgiven, or $50,000 as some Democrats are asking?

For personal finance experts, one thing is clear: there’s no reason to pay now.

“It’s been a roller coaster ride for a while,” said Richard Cooke, financial planner at 2Point0 Financial in Indiana. “I have a handful of clients who have the funds available to repay their student loans, but we are waiting for a clear message from the administration before making a final decision.”

The wait-and-see approach can be frustrating for borrowers looking to get rid of debt burdens. And it should be noted that the forgiveness would only apply to federal student loans. Payments on private loans have not been halted, although some are still offering temporary deferral or modified payment plans.

Advisors say there are ways to prepare for a future with student loan forgiveness, while hedging your bets.


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Many borrowers use the money they would have spent paying off federal student loans to pay off other debts like car loans, credit card obligations, and private student loan payments.

But let’s say you’ve already tackled that and are now considering your federal student loans. Instead of paying off the principal now, some advisors recommend putting that money in a high-yield savings account.

“I encourage customers with federal student loans to make the payments themselves for now until we see how this all plays out,” said Kyle Hill, owner of Hill-Top Financial Planning in Kansas City. , Missouri.

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