What To Do With Extra Cash While Loan Payments Are Paused

The CARES Act first suspended student loan payments from March 2020 to September 30, 2020. At that point, no one really knew how long the pandemic would last. Once it became clear that people were still struggling financially from issues such as layoffs, the student loan relief provisions were extended until January 31, 2021. Now, President Biden has extended the offer again with the option to continue opting out of making payments through the end of September of this year. So what do you do with all of that extra cash? You have several options for bolstering your finances as long as the provisions exist.

Knock Out Your Credit Card Debt

Student debt isn’t the only financial burden that people carry. Most likely, you have at least one credit card with high interest rates that feels impossible to pay off. When you consider that your credit cards probably have higher interest rates than your other loans, putting your money here first can have a dramatic impact upon your financial standing. Keep in mind that this option works best if you don’t continue to put any more debt on your card. Stash the card away somewhere safe and don’t even think about it except for when you are making those bigger payments.

Deal With Your Personal Loans

In addition to higher education debt, you might have taken one out for personal reasons. Whether you used your personal loan to buy a car or address health needs, this type of loan can also carry a high interest rate. While your student debt isn’t accumulating interest, you have a great chance to pay personal loans down. Putting extra money into these payments comes with the benefit of making each dollar go towards the principle versus the interest. As you explore this option, keep in mind that some personal loans have prepayment penalties that could make this less effective for bolstering your finances. Check with your lender to find out your loan terms. If there isn’t a prepayment penalty, then this could be good way to go.

Put Extra Payments Towards Your Mortgage

Mortgages are right up there with higher education debt when it comes to being a struggle to pay off in a reasonable time frame. With the stress of worrying about your school loans off of your plate, you have an opportunity to focus on your home loan. Even if you just put an extra $100 or so towards your home loan, you’ll be building equity and paying it off faster. Keep in mind that you’ll also want to check your terms to make sure you won’t be penalized for paying off the loan early.

Continue Making Student Loan Payments

Your first thought might be to enjoy the freedom of not having to pay on your student debt for the moment, but it could work in your favor to continue the payments if you have the means to do so. With the current interest rate at zero, you have the chance to make each dollar go to what you owe. Until we can convince the federal government to make this a permanent solution, you have the opportunity to get an early start on enjoying the benefits of zero interest student loans.

When you consider the fact that student loan payments are often several hundred dollars, the current pause on payments gives you some serious cash to put towards good use. The right thing to do with your extra money will vary according to your current financial needs, but taking action now can pay off big later. As you decide how to spend your payment savings, keep in mind that zero interest student loans could help you continue to benefit financially. Make your experiences with saving on interest known to your local Congressmen, Senators and the President. Staying actively involved and vocal is the best way to make sure this benefit for borrowers continues to happen.

Learn how to take action by joining our movement on the fight toward zero interest, principle only student loans.