With student loan payments still on pause, is it time to invest or save?

I was never optimistic the White House's massive student loan forgiveness would happen.

Before applications could be taken, opponents started attacking President Biden's plan to cancel as much as $10,000 in college debt for individual borrowers earning less than $125,000 and less than $250,000 for couples filing a joint federal tax return. Pell Grant recipients could have as much as $20,000 of their loans erased.

Critics such as the Republican attorneys general of Arkansas, Iowa, Kansas, Missouri, Nebraska and South Carolina have gone to court to challenge Biden's legal authority to forgive over $400 billion in student loans for more than 40 million borrowers.

Now, the program's future rests with the Supreme Court.

For those still paying off college, is there reason for hope?

Given the conservative makeup of the court, I would be shocked if the justices sided with the Biden administration. So, what should you do until we know for sure?

A reader from Delaware e-mailed asking for advice on behalf of a student who graduated in 2021. The graduate has been working, living at home and saving, hoping to repay her education loans as soon as possible.

What should borrowers do while loan forgiveness is in limbo?

Do what you can to take advantage of what could be the last of the loan pauses, which started in March 2020.

The latest one was set to expire at the end of this month. But because of the court challenges, the Education Department extended the pause again, this time until the department is permitted to proceed with the debt relief program or the litigation is resolved. All of this is pegged to a June 30 deadline.

If the program isn't implemented and the litigation hasn't been settled, loan payments will resume 60 days after the June deadline. It's a convoluted way to say: You might have until September before you have to restart your loan payments.

Nonetheless, don't expect another reprieve. Inflation is showing signs of easing, making it harder for the administration to keep delaying the resumption of federal loan payments.

Should savings be used to pay down student debt?

One of the biggest perks of the payment suspension has been the zero interest rate. This meant any voluntary payments went straight to reducing the principal.

For those who could afford it — particularly people whose debt is above proposed forgiveness amounts — I've recommended they continue to make payments, in some cases far exceeding the minimum required.

Some people followed advice to stockpile cash that would have otherwise gone to payments.

"What I was encouraging people to do is to continue making those payments, but instead of sending them on to the lender, deposit them to a high-yield savings account and then use that to earn a little bit of interest," said Mark Kantrowitz, a financial aid expert and author of "Who Graduates from College? Who Doesn't?" "It also puts you in a better position. If an emergency happens, you can use it as an emergency fund, or you could use it to pay down higher-interest debt."

As part of the pandemic-related pause, folks who voluntarily sent in payments could ask for the money back should they need or want it. After Biden announced the debt relief, student loan servicers were flooded with refund requests. The strategy was to get back at least up to the loan forgiveness maximum — $10,000 or $20,000 — and then apply for debt relief.

Borrowers boasted on social media platforms of successfully getting refunds, which also meant their loan balances were reinstated. So I hope those folks put that money aside, considering that litigation could torpedo the debt relief program.

Could Congress step in next term? With Republicans controlling the House and the Democrats having a slim majority in the Senate, it's unlikely there will be legislation pushing Biden's plan forward should the Supreme Court shutter it.

Should you invest the money?

No — the risk of loss is too high. The stock market is volatile, largely because of economic uncertainty, particularly regarding the staying power of high inflation. There is no guarantee that you'll have returns that will outpace the interest cost.

With the loan forgiveness program in limbo, hold on to cash earmarked for debt repayment. Be ready to pay down debt before the end of the pause to take advantage of the interest-free period.

Should you pay down debt that surpasses the proposed $10,000 in relief?

If your loan exceeds the maximum allowed under the Biden plan, then yes, pay off as much as you can while no interest is being charged. The savings can be significant.

Unlike other forms of debt, such as credit cards, direct federal loans are "daily interest" loans, the Education Department explains to borrowers at studentaid.gov.

Most of your monthly payments may cover very little principal, depending on your interest rate and other factors.