Student loan pause – what financial tips to do
Before 2021 ended, the White House announced extending the student loan pause. This is great news because millions of student loan borrowers are still coping with the impacts of the pandemic. If you’re one of them, this gives you “break time” before resuming payments. The question is, what should you do with it?
Consider the features of the student loan pause, and you can do so much with it. For example, the extra deferment period could be your time to redirect student loan repayments on other stuff. Even better, you could pay off your student loan debts faster. I could give you tips on how to get rid of debts quickly!
I’ll start by explaining more details about the student loan pause extension, especially its features. Then, I’ll go through the several things you could do now that the new deferment period is in effect. After that, I’ll cover various methods that could speed up your repayment, from debt consolidation to do-it-yourself techniques.
What does the student loan pause mean?
On December 22, 2021, President Joe Biden released a statement about extending the pause on student loans payments for an additional 90 days.
President Biden is glad that the US added 6 million jobs last year. However, he put the extension in place as he recognizes the ongoing struggle of student loan borrowers.
The original deadline was January 31, 2022, but now it’s May 1, 2022. The WH statement also said that the Department of Education will continue working with borrowers.
US Education Secretary Miguel Cardona said that the Department would continue to provide tools and support to borrowers to enter into the right repayment plan.
This is an active relief program extension, so its other features will also continue. Of course, you have to check if your student loans meet their requirements.
If your loans qualify, you receive various benefits. For example, collections for defaulted loans are suspended during this student loan pause.
The best one you should look out for is the 0% interest rate. You can take advantage of that feature by doing two things, letting the deadline come or sending larger monthly payments.
Read More: How Does Student Loan Deferment Work?
What should I do during the student loan pause?
Just waiting for the deadline to come is not a good idea. The pause just means you don’t have to submit payments yet. However, it will build interest that you’ll have to pay later.
If you’re not careful, you will need to meet larger payments once the student loan pause ends. We cannot be sure that the President will extend it again later.
If you couldn’t keep up with the larger payments later, you might default on your loans. As a result, your credit score may go down and cause even more issues.
That’s why the best course of action would be to pay the interest every month. In turn, you’ll keep it from growing larger, and it will help you focus on the debt’s principal amount or principal.
On the other hand, you could divert the money for student loans to other stuff. Maybe you have other debts or bills that you need to pay off immediately.
If you don’t have this kind of situation, you can go the extra mile during the student loan pause. It could help you be free from student loans faster!
How can I pay student loans faster?
You can start by checking the other relief programs from the Education Department. The following options can make student loan payoff easier:
- Change repayment plan – If you haven’t yet, you could turn your current plan into an income-driven repayment plan. This will cap the monthly payments from 10% to 20% of your discretionary income.
- Loan consolidation – You could combine your student loans into one that charges lower interest. This is known as debt consolidation, and it can help you pay less every month.
- Student loan forgiveness – The government offers various types, such as public service loan forgiveness (PSLF). It requires borrowers to work a public service job and complete 120 monthly payments. After that, you won’t have to pay the remaining balance.
Note that these methods are best for federal student loan payments. If you have private ones, ask your loan provider for ways to pay your student loans faster.
Other things to do during the student loan pause
Now that you don’t have to pay student debts for a while, you might want to rethink your finances. Look back into your budget to see how you can improve it.
Ask yourself if there are expenses you can cut back. If there aren’t any, you might want to earn more during the pause. That could buy you enough time to find a side gig.
For example, you could join an affiliate marketing program. You will have to promote a product and service to people, and those folks have to use your code when paying for them.
Your chosen company takes note of every purchase made with your code. Then it pays you for each one. You could start your first with this great option from LeadAdvisors.
What’s more, you could try passive income apps for more income. They work like bank savings accounts, but they often pay more. Even better, they’re accessible via the internet.
Eventually, this could help you make more money. You may get rid of other debts using those extra funds. Alternatively, you could focus all that money on paying student loans.
This student loan pause could be a great time for you to build an emergency fund. This can help prepare for payments you never expected, such as an injury or accident.
It may seem like an overreaction, but you have to remember that we live in uncertain times. In March 2020, the world didn’t expect the massive impact of the novel coronavirus.
Yet, we are still fighting the Omicron variant at writing. This should be a sign that you need to expect the unexpected. Student loans may pause, but money management never does!
That’s all there is to know about the recent student loan pause extension. If you’d like to know more, check this Federal Student Aid web page for more information.
That official website can also show you more ways of handling your student debts. Even better, the internet has so many other free resources. You don’t have to look further, though!
The Inquirer USA website has many other articles that can teach more personal finance tips. Those can help you deal with other loans and money problems besides student loans.