3 Options for Student Loans During Payment Pause

The Biden administration has again decided to extend the pause on federal student loans until August 2022. The delay gives additional relief to borrowers who would have begun paying on their student loans in May. The government paused payments on student loans at the beginning of the pandemic, and there have been talks of widespread cancellation of student loans. The pause on student loans allows borrowers some time to figure out what they will do with their student loans once payments resume. Here are three options to look into while you don’t have to make payments.

Continue Payments On Student Loans

You could choose to do nothing and continue to make payments on your student loans. Cancellations in the amounts of $10,000 and $50,000 are possible. However, there is no guarantee that this will happen. Even if it does, there will most likely be income limitations, and your income as a PA might exclude you from cancellation. 

You can continue to make payments while your federal student interest rates are at 0%. That means your entire payment will be going toward your principal, significantly reducing the amount you’ll pay. 

Don’t Make Payments

If you believe that there is a good chance the government will cancel your student loans, or you work for a qualified employer for student loan forgiveness, you can continue to hold off on making payments. If you’re going for public service forgiveness, it makes sense to pay as little as possible. You would need to work for a qualifying employer for 120 payments (ten years) for this program.

Instead of putting your money towards student loans, you could do something else with it, such as investing it or putting additional money towards your retirement accounts. 

Refinance Your Student Loans

Interest rates have been low for student loan refinance. If you believe you wouldn’t qualify for forgiveness or cancellation, another option is to refinance them. You would lose out on any benefits that federal student loans give you, but it’s possible to significantly reduce your interest rate, saving you a lot of money. You would want to look at how much you owe and how long it will take to pay them off. If you can pay off your loans in a couple of years, refinancing them might not make sense. 

Although there are a few options you can choose to do with your student loans, one thing is for sure; you don’t have to do anything with them for a few more months. Use the next couple of months to plan what you will do once payments resume, so you can manage your expenses when they restart. 

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