Seven Smart Ways to Take Advantage of the Student Loan Pause

By Chika


Last Updated: April 22, 2022


The current pause on federal student-loan payments and interest, which was set to expire on May 1, just bought millions of Americans some time.

The current pause has been extended through the end of August — that is if the Biden administration doesn't extend it again to get past the midterm elections. This is the 6th time the federal government would pause payments on federal student loans since March of 2020.

The 4-month reprieve may not be a long stretch, but it is enough to make some changes. For starters, it can help you prepare for the inevitability of having to begin repayment on your student loans in the future.

With inflation eating into people’s budgets, the reprieve in student loans could be just long enough to catch your breath before you take another deep dive into your pockets.


Here are seven ways to take advantage of the student loan pause. 

1. Clarify how much you owe

To prepare for the inevitability of having to repay your debts again, clarify how much you owe as well as what your monthly payments will be when they commence. You may accomplish this by going to www.studentaid.gov and logging in with your FSA ID Username, email address, or phone number.


2. Stick to a budget like there was no pause 

The eventual resumption of student-loan payments will feel like a pay cut to the roughly 40 million borrowers who have benefited from the moratorium. So to prepare your budget for the return of this expense, it pays to start living now as if the money is actually due each month. 

Use the time to identify areas where you can cut back on your spending gradually. Then, any reduction in your lifestyle won't feel like as much of a shock later if the pause is not extended. 

Budgeting enables you to weed out unnecessary expenses from your income.

Recurring subscriptions is one area where many people lose money. A 2021 study carried out by JPMorgan found that 71% of Americans wasted at least $50 a month on unused recurring expenses such as subscription fees. Check if you are still using some of the subscriptions you bought during lockdowns.

Top 8 Simple Budgeting & Spending Tips to Help You Beat Inflation


3. Keep paying your loans

If you can afford it, there is a big payoff for continuing to make your student-loan payments despite the pause. Since no interest is charged on your debt at present, additional payments can help you chip away at your principal during the break. 

For example, if you owe $10,000 in federal Student loans at a 5.28% interest rate, regular payments for following a five-month payment without incurring any interest on the loan will save $217 off your principal and three fewer payments over the 10 years.


4. Focus on other debt or building emergency funds

This is also an opportunity to make extra contributions to other debts or build emergency savings. This would provide you with much-needed cover if repayments resume. The reduced interest rate on other debt as a result of the extra contributions would give you some elbow room to accommodate student loan payments. 

For example, making an extra contribution to your card payments would reduce interest on your credit card loan. This would save you some extra money, which you can channel to paying your student loan debt. 


5. Look for ways to boost your income

If you have already drastically cut your expenses, then you might need to seek ways to boost your income before repayment starts. Ask yourself if your current income can absorb the burden of student loan debt when payments resume.

Even if it can, you should not waste this opportunity to shore up your finances by creating another income stream. You could ask for a raise, or consider changing jobs to one that offers higher remuneration. Alternatively, you can start a side hustle.


6. Ask for help

When the moratorium on student loans expires, there will be additional options for relief. Some businesses now provide student debt assistance, such as debt management programs that aid employees in repaying their debt.

If your firm doesn't have a student loan debt aid program, inquire about it with human resources.

Candidates may search job posts from hundreds of organizations that provide student loan perks on the Goodly Jobs Board. Employers can contribute up to $5,250 per employee per year to qualified education costs like student loan aid without affecting the employee's total taxable income.

If you don't have a job, talk to your loan servicer about your choices before starting repayment again, such as an economic hardship deferral or an income-driven repayment plan.


7. Don't assume the loan will be forgiven

This should probably be the first option on the list, but it does not reduce its relevance. One grave mistake you shouldn't make during the current pause period on federal student loans. Don't assume your student loan debt will be forgiven, and that any financial decisions you make won't matter in the long run.

Most student loan experts agree that broad student loan forgiveness is extremely unlikely — not this year and maybe never. This may be a political gimmick by the current administration to garner votes from the electorate.

Even if some student loan debt was canceled, the Biden administration's most recent plans only proposed forgiveness of up to $10,000 per qualifying borrower.

Because student loan forgiveness is unlikely to be imposed by presidential action, even that level of forgiveness is unlikely to be implemented, given that it must pass through Congress.

You can get ahead! 

With all of this in mind, it could be a good idea to resume your loan payments where you left off. The fact that interest rates are now set at 0% means that every dollar you pay will go directly toward the principal of your loan if you have the income to do so.

If you wait until the Biden administration stops extending the emergency pause before making student loan payments, you may find that you've kicked the can down the road far longer than you should have. What you do now has the potential to make that truth easier or harder to deal with, and the option is yours.


The Bottom Line on the Student Loan Pause

If you're like the majority of people, you haven't paid your student loans in almost two years. Even though the forbearance period has been extended, now is a great time to examine your finances and make plans for beginning payments next year.

For example, you may need to cut or restructure specific expenditure areas now to ensure that you have enough money in your budget when payment is due in 2022.

It's fair to expect that student loan payments will resume in 2022, based on the most recent declaration. The suspension of student loan payments for two years is unique, and it provides debtors with an opportunity to get ahead.

Photo by Buro Millennial


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