Odds of 0% forbearance extension? Should I refinance before March?

[medicoFIRE]

I have about 300k in debt and have been saving money during the 0% forbearance. I could probably pay down half of my debt in May when the forbearance ends and still maintain a 20k emergency fund. I would like to hear the opinions from those in a similar situation although any advice would be appreciated. I know the rates may go up a bit in March if the fed raises rates (seems likely at this point). I don't want to miss out on the rest of the 0% forbearance, but I would obviously benefit more over the long run with a lower rate. I've debated just trying to pay off the debt ASAP within a couple years, in which case the interest rate wouldn't matter much. I do not work for an entity that would qualify for PSLF so that is not an option. Part of me thinks that I should just refinance on a 15 year plan and invest like crazy. Another part of me thinks the psychological benefit of being debt free is hard to quantify.

Anyway, I think my main question here is to ask what people think the odds are of another extension? With the midterms approaching, I'm thinking it is more likely than not that they extend the forbearance. Especially if the economy responds poorly to an interest rate hike in March. How many gamblers are out there? I know I'm not the only one waiting on this 0% forbearance to play itself out. Of course PSLF people are going to watch it play out, but I'm wondering what those are doing who do not qualify for PSLF.

[The White Coat Investor]

I think the odds of an extension beyond April are higher than they were for an extension beyond January! It's an election year. But no way to know for sure. Each one of them has surprised me so far. If you're not sure, why not wait until April? Yes, you may end up with a slightly higher interest rate but it sounds like you're going to pay this thing off so fast you'll still come out ahead.

[CordMcNally]

I agree that I don’t see any way they’d change it until after November with how long it’s been going on at this point but politicians do unsuspecting things all the time.

[Turf Doc]

With the uncertainty around omicron i was very surprised that they were holding strong on ending the forbearance, so i was not surprised when they extended it again. That said, I think i would be surprised if they extended it again unless theres another variant and more uncertainty. Regardless of the optics its obvious that the administration doesnt really want anything like broad forgiveness imo.

like wci says, the more willing you are to destroy the loans in a short time frame the more id be comfortable waiting for the 0% to end for reals

[medicoFIRE]

Thanks to all! I think I'll gamble and wait until mid April to do anything. If the forbearance is not extended, I'll accelerate my timeframe to pay them off after refinancing to a lower rate. And if it is extended, I'll bank the money and put it in I-bonds or something. Cars are both paid for so hoping to be debt free (except mortgage) within 2 years max.

[RoentgenRacing]

Similar boat. I'm refinancing. I don't disagree with what people say about extensions and midterms. My problem revolves around people saying "slightly higher rate."

No one ever defines what they mean by that phrase. I can't and won't hold a random internet commenter to a prediction but obviously the hard part is reading stuff about rates likely going up 25 basis points and what that means to a private company. No one has a crystal ball but when I think of the phrase slightly higher I think 0.25%. Maybe others think 0.5%? The point is that when I run the hypothetical situations (when extension ends; rate rise; combos) this makes or breaks the simulations.

I do think rates will rise faster early in the year and not gradually over the year.

So not to hijack the thread but perhaps dovetail with it: what is your idea of a higher rate?

[Tim]

With the uncertainty around omicron i was very surprised that they were holding strong on ending the forbearance, so i was not surprised when they extended it again. That said, I think i would be surprised if they extended it again unless theres another variant and more uncertainty. Regardless of the optics its obvious that the administration doesnt really want anything like broad forgiveness imo.

like wci says, the more willing you are to destroy the loans in a short time frame the more id be comfortable waiting for the 0% to end for reals

Omicron will likely be in the rear view mirror by the deadline. However, the politics will be heating up too. After all, much of the Omicron appears to being marching to a different messaging theme.

[Hank]

Are you saving at least 20% of gross income towards retirement? I get why folks want to slay student loan as soon as possible. But you certainly want to maximize available qualified accounts and save sufficiently for retirement while also killing off the loans.

[JBME]

Similar boat. I'm refinancing. I don't disagree with what people say about extensions and midterms. My problem revolves around people saying "slightly higher rate."

No one ever defines what they mean by that phrase. I can't and won't hold a random internet commenter to a prediction but obviously the hard part is reading stuff about rates likely going up 25 basis points and what that means to a private company. No one has a crystal ball but when I think of the phrase slightly higher I think 0.25%. Maybe others think 0.5%? The point is that when I run the hypothetical situations (when extension ends; rate rise; combos) this makes or breaks the simulations.

I do think rates will rise faster early in the year and not gradually over the year.

So not to hijack the thread but perhaps dovetail with it: what is your idea of a higher rate?

when is the last time rates rose more than .25 points at one time? My recollection is this did happen in the 90s but not since. I see a .25 increase in March but not more. Then another .25 at the meeting after that and then .25 at the next meeting.

[Andrew StudentLoanAdvice]

With this being an election year and president biden running on a campaign which talked lots about student loans, I wouldn't be surprised if the student loan hold will be extended again. What I would do and what I'm telling my clients in your situation is to get quotes in April. If payments resume in May then you refinance. If the payment hold is extended, wait until then to refinance.

[pierre]

Thinking out loud here, but would it be possible for the government to do something in the middle, like end the pause but continue to not charge interest for a year or so or whatever? Have people start paying back their loans but with lower payments than the originally would have.

I doubt it will ever happen, but it would be ideal for me and probably a lot of other people. In normal times, the government should charge little to no interest for student loans in my opinion, let alone the ridiculous 6.8% I’m “currently” at.

[drmka26]

I think the pause will not be extended. Biden is so detached from reality about student loans. He was the main architect of the bill that said student loans are not dismissed in a bankruptcy. He never even liked the idea to dismiss portions of it when his own party is calling for 50k forgiveness. I don't get it - what does he have to loose? He can do it with a flick of a pen - sure, if it gets to the courts and gets shot down, that's one thing. At least, try, old man .

[icestorm]

I read recently that Biden is being pressured to forgive 50K at the minimum. My wife has +300K in loans and to me it does not make sense to refinance through a private lender. I think for us the benefits of federal loans outweighs going private for a lower interest rate. In addition, i think with so much uncertainty it make sense for us to stay with federal.

[CordMcNally]

I read recently that Biden is being pressured to forgive 50K at the minimum.

This has been happening for over a year. There are arguments to be made for reasons behind doing it/not doing it but I'd be surprised if $50k actually happens.

[Turf Doc]

I read recently that Biden is being pressured to forgive 50K at the minimum. My wife has +300K in loans and to me it does not make sense to refinance through a private lender. I think for us the benefits of federal loans outweighs going private for a lower interest rate. In addition, i think with so much uncertainty it make sense for us to stay with federal.

You can just refinance some of them. And yes, there’s pressure, but when have you actually heard Biden talk about student loans recently? Do you think he sounds like he’s even close to that? And that’s assuming he can do it at the stroke if a pen.