Years ago, I applied for the Borrower Defense to Repayment Program because I have student loans for a school that was punished for doing some shady things. Apparently the Department of Education is now being sued for never giving a response to those applications, and so they have put all of my student loans into forbearance for three years.
Now I doubt they will cancel any of my loans, and they certainly won't cancel all of them because some are for other schools that never had a problem, so I intend to keep paying them off. I was going to call and opt out of the forbearance, but then I wondered if I could use it to my advantage.
I have several different loans at different interest rates. My thought is since I currently have no minimum payment and the interest will not be capitalized until the end of the forbearance, I could take the payment I'm currently making that's spread across all loans and instead apply it solely to the loan with the highest rate. This seems like it should pay the loans off faster, even though interest will continue to accrue on the loans I'm not making payments towards.
Is this thought process correct? Are there any disadvantages I'm not considering? If I do this and end up with some interest capitalized on the lower rate loans as a result, will that make me worse off?
The balances range from $300 to $13,000 and the interest rates range from 3.4% to 6.8%. Here's the full breakdown in case it affects the answer:
Group A Balance: $1800 Rate: 4.5%
Group B Balance: $300 Rate: 5.6%
Group C Balance: $3400 Rate: 3.4%
Group D Balance: $900 Rate: 6.55%
Group E Balance: $1300 Rate: 6.55%
Group G Balance: $2700 Rate: 6.8%
Group H Balance: $2600 Rate: 3.86%
Group I Balance: $4800 Rate: 3.86%
Group J Balance: $5400 Rate: 4.66%
Group K Balance: $13,600 Rate: 4.66%
I'm paying $600 per month. (Group F is paid off, if you were wondering why it was skipped.)