How To Maximize The Current Student Loan Pause Extension

Ad Blocker Detected

Our website is made possible by displaying online advertisements to our visitors. Please consider supporting us by disabling your ad blocker.

Borrowers with federal student loans recently learned they’ll have another four months to skip payments without any interest accruing. This headline is like a broken record at this point, mainly because this has happened six times since the federal government originally paused payments on federal student loans in March of 2020.

This newest pause on payments comes with an end date of August 31st — that is, if the Biden administration doesn’t extend it again to get past the midterm elections. This means that, at the end of this newest pause period, many federal student loan borrowers will have no reported progress on their student loan debt for two years and five months.

While political factors are likely playing a role in this decision, the Biden administration says deferment is still needed due to the Covid-19 national emergency and the “unprecedented economic disruption it caused.” In a White House press release, President Biden said the following: “If loan payments were to resume on schedule in May, analysis of recent data from the Federal Reserve suggests that millions of student loan borrowers would face significant economic hardship, and delinquencies and defaults could threaten Americans’ financial stability.”

Whether you are personally facing hardship or not, these additional four months can help you prepare for the inevitability of having to begin repayment on your student loans in the future. How can you make the most of this additional time you have? Consider these steps to get ready before it’s too late.

WASHINGTON, DC – MARCH 14: On the second anniversary of the student loan payment pause, We, The 45M, … [+] use signs and projections outside of the U.S. Department of Education to celebrate the pause and ask Education Secretary Cardona to cancel student debt on March 14, 2022 in Washington, D.C. (Photo by Paul Morigi/Getty Images for We The 45 Million)

Getty Images for We The 45 Million

Figure Out How Much You’ll Owe

In order to prepare yourself for the inevitability of having to repay your loans again, you should make sure you know how much you owe and how much your monthly payments will be when they resume. You can do this by logging into your student loan account at using your FSA ID Username, your email or your phone number.

Once logged into your account, you can look at your current federal student loan balances, their respective interest rates, and your payment amount. You can also find out your student loan servicer, which may have changed if you haven’t made any payments since March of 2020.

Research Payment Plans For Your Loans

If you are facing financial difficulties due to the pandemic or any other reason, now is a great time to explore all the different repayment options for your federal student loans. Remember that the standard 10-year repayment plan for federal student loans is the default option but not the only option. In fact, there are quite a few repayment options available that can help you secure a lower monthly payment over a longer repayment timeline.

For example, federal borrowers can opt for a graduated repayment plan that comes with lower monthly payments at first with a slow and gradual increase in payments over time. Another option is an extended repayment plan, which lets federal borrowers repay their student loans with fixed or graduated payments over 25 years. That said, extended repayment is only available to Direct Loan borrowers who have more than $30,000 in outstanding student loan debt.

Also explore the possibility of going with income-driven repayment plans. These plans let you pay a percentage of your discretionary income for 20 to 25 years before forgiving your remaining student loan balances. If your income is low enough, your monthly payment on an income-driven plan could even be as low as $0. Plus, if you’re looking at loan forgiveness through programs like Public Service Loan Forgiveness, you must be enrolled in an income-driven repayment plan.

Shore Up Your Overall Finances

While payments are paused and interest rates are at 0%, now is an excellent time to financially prepare for repayment — even if you might switch payment plans. While your next best steps in this realm will depend on your unique financial situation, some moves you can take to prepare for repayment include paying off other debts (especially high interest debts like credit card debt) and looking for ways to earn more money if you need to.

By paying off high interest debt, you have the potential to reduce your long-term interest costs while potentially ditching some monthly payments you’re making right now. And, we all know the benefits of earning more money whether you need the cash to make your student loan payments or not. Fortunately, unemployment is low and jobs of all kinds are plentiful right now.

Tracking your spending and creating a written monthly budget can also help you figure out where your student loan payment will fit in once payments resume. For example, you may think you cannot afford your payments, but tracking your spending could help you find some areas where you could spend less if you needed to.

Also note that you can still request a refund of any federal student loan payments you have made since March of 2020. This step will set you back in terms of repayment, but it is worth exploring if you are truly struggling financially and worried about making payments again.

Consider Making Payments Anyway

Finally, there’s 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 moves you make won’t matter in the long run.

The fact is, most student loan experts agree that broad student loan forgiveness is extremely unlikely — not this year and maybe never. Even if some student loan debt was forgiven, the most recent proposals from the Biden administration only mentioned forgiving up to $10,000 in debt per eligible borrower. Since student loan forgiveness likely cannot be forced through executive action, even that amount in forgiveness is doubtful to come to fruition.

With all this in mind, it can definitely make sense to pick up with loan payments where you left off. If you have the income to do so, the fact that interest rates are currently set at 0% also means that every dollar you pay will go directly toward the principal of your balance.

If you wait to make student loan payments until the Biden administration stops extending the emergency pause, you could easily find that you’ve kicked the can down the road far longer than you should have. At some point, your student loan payments will be back in full force. What you do now could make that fact easier or harder to handle, and the choice is up to you.