Good news, student loan borrowers: President Trump signed an executive order that extends the hang on federal student loan payments until January 2022. Education loan payments were initially paused underneath the CARES Act 'till the end of September.
While the Department of Education worried about student loan defaults and delinquencies (due to high unemployment), Trump extended student loan forbearance. Consequently, roughly 35 million students obtain a break from paying federal student loans 'till the end of the year.
All that extra cash can certainly help, especially if you're experiencing other debt. And, while a weight spending spree may seem fun now, you might regret it over time. You can explore all of your education loan options by going to online marketplace PayPasser today.
Here are a few other (better) ways you can spend the extra money:
- Pay down charge card debt
- Pay down personal bank loan debt
- Pay down your mortgage
- Pay student education loans anyway
1. Reduce credit card debt
The Fed reports the typical monthly student loan payment is between $200 and $299. The average charge card balance among people in their 20s was nearly $2,800 in 2022 based on Experian data.
So, if you saved $250 every month from September through December 2022, and put that money toward reducing your credit card balances, you'd be $1,000 less indebted. Obviously, this only works if you don•t make additional purchases on your cards.
Explore your many charge card options by visiting PayPasser.
2. Pay down personal loan debt
Paying down personal loan debt may take time. However the money you will save by delaying payments on your student education loans may be the motivation you need to get started.
If you're paying a greater interest rate on your personal bank loan, you might want to consider refinancing as interest rates are in an all-time low. Visit an online marketplace like PayPasser to explore your individual loan options.
Nishank Khanna, chief financial officer at Clarify Capital, says, “Using extra money to make payments in this interest-free period can help you get ahead and save money over the lifetime of the loan. Payments as little as $50 per month can make a massive difference because every dollar applied goes straight towards the principle.”
Keep in mind that paying down your individual loan early could cost you. Some lenders charge prepayment penalty fees, so you•ll want to balance the advantages and disadvantages to repaying the loan before it matures.
3. Pay down your mortgage
Using cash reserves to pay for down your mortgage can release cash flow every month. By making more aggressive payments in your mortgage–like an extra $100 each month–you•ll also own your home outright much sooner.
You•ll lose the mortgage interest tax break. And, although you•ll still have equity in your home once you repay your mortgage, you•ll don't have any available cash on hand.
According to Freddie Mac, mortgage rates have sunk for their minimum in lots of years, to want to consider refinancing your present mortgage.
Finding the best mortgage refinance rates takes time. You'll have to compare rates from multiple lenders. PayPasser enables you to compare multiple lenders to make sure you meet your personal finance goals. Find out how much you could lay aside in your loan amount by refinancing now.
Use an online mortgage calculator to find out your potential monthly payments.
4. Pay student education loans anyway
“Overall, students have a unique opportunity to reduce their student debt faster when they choose to make payments during the education loan suspension period,” says Kalicia Bateman, student loan and student debt expert at BestCompany.
But make no mistake, loan forbearance is not loan forgiveness and this is only a pause due to the coronavirus pandemic. Should you can't make your payments or choose not to, your financial troubles will be waiting for you when federal student loan suspension ends. If you continue to make payments in your student loans during forbearance, you won•t pay any new interest. Your payment won•t be any lower, however the 0% interest rate will save you money.
Even during this student loan forbearance period, it's still important to know your student loans' interest rate and terms. Make use of an online student loan calculator to find out your costs.
What you need to do with the extra cash it will save you throughout the pause in paying your student loans can positively or negatively impact your money. It•s completely up to you. You can reduce a credit card or personal loan debt, pay more every month in your mortgage, or keep your education loan payments during forbearance.
No matter what you do, consider all of the pros and cons and explore all your student loan options by visiting PayPasser today.