Public Service Announcement for all those with federal student loans that are currently in repayment status! You now have nine months out of this year that you do not have to pay for your student loans nor accrue interest on them!
Sounds like a great announcement since we are in the middle of a pandemic, and for those that are fortunate enough to be doing well financially, here are three ways to utilize this extra cash!
What to do while student loans are in forbearance
Pay down your credit card debt- Build an emergency fund
- Make payments directly toward your student loan principal.
1. Pay down any credit card debt you may have
Credit cards usually yield a higher interest rate than student loans and the average credit card balance for millennials is over 2.5K. If you are saving $200 or more dollars from the student loan forbearance, why not put that money toward paying down your credit card balances and avoid paying the high interest.
2. Build/Replenish your emergency fund, if you can
Nearly 30% of adults have no emergency savings for unexpected expenses. Emergencies can strike at any time, so having quick access to cash is crucial.
3. Make direct payments on student loan principal
As of now there is no plan set in stone to completely erase all federal student loan debt. Since it doesn’t seem like this debt will disappear anytime soon, you can use this interest free period to make monthly payments towards the principal on your student loans and possibly pay your loan off in a shorter amount of time.
What have I been doing with my extra money? In 2020, student loans were in forbearance from March – December. I was able to put extra money towards my car payment and pay it off, put money aside for a down payment on a house with my fiancé and make payments toward my wedding! Don’t let this opportunity pass if you are fortunate to do so!