President Joe Biden’s administration is stretching out the pandemic pause on student loan debt for a “final” time, officials say — until Jan. 31, 2022.
Federal student loan payments, interest and collections had been set to resume Oct. 1. Keeping the freeze in place for four extra months “will allow borrowers to plan for the resumption of payments and reduce the risk of delinquency and defaults after restart,” the Department of Education said in a statement Friday.
If you’ve got some of the nation’s $1.7 trillion in student loan debt, the reckoning day is still coming — just a little later. And don’t count on your debt disappearing in the meantime, because there’s been no movement on the president’s campaign promise of broad student loan forgiveness.
Student loan payments were first suspended in March 2020. Here are seven ways to make the most of the next few months, get your loans back on track.
Your payments will resume in January during the time of month when they were due previously. If you were accustomed to mid-month due dates before COVID, that’s when you should expect to have to make your payments again.
If you previously had automatic withdrawals set up for your monthly payments and have changed banks or accounts since the pandemic hit, you’ll need to update that information with your loan servicer. The same goes for your mailing address, if you moved after March of last year.
You’ll want to use the next few months to set aside funds to cover your first payments, to make the transition easier on your wallet. Redirecting some spending money will help you determine whether you need to cut back on expenses to bring your student loan back into your budget.
Preparing in advance beats getting ominous notices from your loan servicer if you can’t make your payments.
Review options if you’re not working
If you’re still out of work or are working limited hours, you have a few ways of catching a break when loan payments restart.
But instead of kicking your debt down the road, you might seek an income-driven repayment plan, to pay down your loans in a manner you can afford. You’d be able to make reduced payments for 20 or 25 years, and then any remaining balances would be forgiven.
This is the time to explore and settle on an alternate payment option — because applications for deferment and income-drive repayment plans are likely to surge before the Jan. 31 end to the moratorium.
Deal with your other debts
While some people were able to use the pandemic to pay down debts and increase their savings, others found themselves struggling to get by.
A survey from CreditCards.com early this year found more than half of adults with credit cards added to their debt in 2020. And, a Federal Reserve survey shows revolving debt, which includes credit cards, soared in June at an annual rate of 22%.
If you’ve been leaning hard on your credit cards to get through the COVID-19 crisis, you’re probably dealing with a pile of expensive interest. You might consider getting those balances under control by folding them into a lower-interest debt consolidation loan.
It’s a way to pay off your other debts more affordably and quickly, so you won’t have to stretch so hard to cover your student loan payments.
Cut other regular bills
If you need even more space in your budget to accommodate your student loan payments, focus some attention on your insurance bills.
Maybe you haven’t shopped around for a better auto insurance rate lately. Well, you could be overpaying by hundreds of dollars a year — especially if you’re working from home more often now, and driving much less.
Experts recommend comparing at least three offers before settling on a new auto policy or sticking with the one you already have. That may sound like work, but finding the best deal these days is as simple as answering a few quick questions online.
And, if you own a home, you can use the same approach to score a much lower rate on your homeowners insurance.
Trim your extra spending
Reducing your credit card and insurance bills may not carve out enough space in your finances for that day when your student loan payments resume. You may need to cut back on spending, too.
Obviously, there are limits, because you still need to cover the essentials: food, your rent or mortgage payment, utilities and so on.
If you’ve got a mortgage, have you refinanced since the pandemic started? If not, rates are again at or near all-time lows, and the mortgage data and technology firm Black Knight said last week that more than 15 million homeowners can now save an average $298 a month with a refi.
Whether you’re an owner or a renter, save when you shop online by downloading a free browser extension that automatically scans for better deals or coupons before you click “Buy.”
Earn a little extra
You may find you’ll need a little extra income for when your student loans start blowing a big hole in your household budget again.
If you’ve got a marketable hobby or talent, you might turn it into a profitable side hustle and give your bank account a boost while doing what you love.
You also might try a fairly effortless way to earn some returns in the red-hot stock market. You don’t have to understand all the Wall Street jargon or have thousands of dollars to build a successful portfolio.
Just download a popular app that helps you invest your “spare change” from everyday purchases — and you may turn your pennies into profits.
Refinance your loan
If you’ve got student loans from a private lender, and not the federal government, the Biden administration’s longer pause on payments and interest charges doesn’t apply to you.
But you have your own remedy if the debt is overwhelming you: You can refinance your student loans at a lower interest rate, to slash your interest charges and pay off what you owe sooner.
Rates on student loan refinances from private lenders have been at historically low levels, and the very best rates go to borrowers with the highest credit scores.
Not sure where your credit score sits? Nowadays it’s pretty easy to check it for free.
This article provides information only and should not be construed as advice. It is provided without warranty of any kind.