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If you owe a federal student loan, you now have about six months to make payments on that debt to start over. Last week, President Joe Biden’s administration announced a ban on federal student loans until January 31, 2022.

This means payments will not continue until next year and interest rates will remain at 0%. The latest extension comes shortly after two-thirds of borrowers said it would be difficult to repay them next month, according to a recent study by Pew Trust.

“What a wonderful opportunity for borrowers to take control of their finances,” said Laurel Taylor, CEO and founder of FutureFuel.io. As of January 31, there will be a two-year suspension. I really encourage borrowers to increase this opportunity – it means nothing to them.

The ban on federal student loan payments is set to end in early September. According to the US Department of Education, this latest extension will be the “last.”

Tip

Make sure your address and email are up-to-date with your lender so you don’t miss out on any important information about your student loan and extension.

This means that any student loan you had before the COVID-19 pandemic will wait until the tolerance policy begins. Experts say you should not rely on any debt owed until then, because it is unlikely that there will be a large student loan waiver – even $ 10,000 promised during the campaign.

“I don’t see student loans coming up with $ 10,000. I don’t think it’s possible without Congress legally, ”said Robert Farrington, founder and CEO of a college investment advisor on student loan debt. But I think he can do a lot of good with the current forces, for example, by improving past programs.

What Biden has to do with expanding student loan relief

Given this latest update, now might be a good time to reconsider your student loan repayment strategy. Note that everyone’s situation is different, but what should you do in terms of student loan repayment?

If you lose a job or a loss of income

Use this time to give yourself a breath of fresh air to address other financial priorities. If you are unemployed or your income has decreased over the past year, continue to focus on covering your essential expenses such as rent or mortgage payments, utilities, groceries, transportation, and so on.

“This relief is for people who have lost their jobs or their income. I advise you to focus on important living expenses and not worry about that guilt or saving money on student loans, because this is the time for you, ”said Cindy, a personal finance coach and zero-based budget founder. Financial education forum on Instagram.

Another thing you can do to reduce your monthly payment is to apply for income-based payments. An income-based payment plan is a monthly payment based on your family size and percentage of compulsory income. If you earn less than 150% of the federal poverty line, your payments may be as low as $ 0.

To register, go to this Federal Student Aid page, and click “Sign In” above to start applying. If you are already enrolled in an income-based plan and your income has changed, ask your lender to verify your income before resuming payments. If you make all your payments on time, your IDR plan allows your loans to be forgiven at the end of the payment period – even if you do not pay in full.

If you are not sure what the best payment option is for you, go to your loan server for help or go to studentaid.gov.

“Remember that your payments may not cover the interest accrued on your loan, which means you can pay a higher interest rate,” Zuniga-Sánchez said. It is important to be aware of these changes in student loan repayment strategies, so I want to issue that warning there.

If you still have a job or income

You can use these extra months to transfer some money to build an emergency fund or to pay high interest rates, such as credit cards or personal student loans.

“At this point, no one should have to pay extra for their debt. Even if you can, you should save that money and get rid of other debts, ”Farrington said.

If you haven’t already, prioritize emergency fund building first. Try to set aside three to six months’ expenses, but don’t worry too much if you feel that saving is now an unattainable goal. Start small and then move on. Next, focus on paying high interest debt: These strategies can help you do that. You can also invest in pension accounts such as 401 (k), IRA, or Roth IRA or pay off any low interest debt you have, such as medical bills or car loans.

If you want to repay your student loans during this 0% interest period, Farmington suggests that you deposit that money into your savings account and then make a one-time payment immediately before the payments start.

“In this way, they keep that money as long as they can,” he says.

If you are behind on student loan payments

Since all extensions will resume once the extension is complete, try renewing your loans as soon as possible. The default payment on federal loans is more than 270 days, by sending your loans to collections and exposing them to bad credit, jewelry, and tax returns.

“As your payments and collection continue, move out of your default so that you don’t have to spend on your salary or taxes,” Farrington said.

You will need to contact your lender, fill out an application and follow a specific procedure to recover student loans and get out of debt. If your application is approved and you pay nine times, even during this tolerance period, your loans will normally be transferred to a new lending server, and you will be out of default.

If credit recovery is not possible for you at this time, there is more delay and patience than the Covide-19 relief. It may give you more time to get back on your feet. For example, there are delays and financial hardship in your student loans. But these options should be your last resort.

Bottom line

If you are part of the majority, you may not have paid student loans for two years. Although the waiting period has been extended, coming next year is a great opportunity to review your finances and plan to restart.

For example, you may need to shorten or adjust certain spending areas now, so you have space in your 2022 budget when payment is made. Based on the most recent announcement, it is safe to assume that student loan repayments will resume in 2022, and it is best to anticipate a curve when possible.

“Two-year suspension of student loans is unprecedented, and it is an opportunity for borrowers to move forward,” Laurel said.