To help with the pandemic, President Biden’s student loan pause was extended for a few months. Some people saw it as a great way to get them back on their feet, while others think it should have happened sooner. Still, this is important if you’re having trouble with student loan debt.
That’s why you should figure out what to do with President Biden’s student loan pause. Fortunately, this article will show you all you might want to do during that deferment period. For example, this is a great time to find a new way to make money. That way, you will be ready to get rid of your student loan debts once the pause ends.
I’ll share more details about President Joe Biden’s student loan pause. Then, I’ll go through what you could do during that deferment period. I’ll discuss how it could make your student debt payoff easier. After that, I’ll talk about other things you could do while you don’t have to pay student debts.
President Biden extended the student loan pause
Today, I announced my Administration is extending the pause on federal student loan repayments for an additional 90 days. pic.twitter.com/mxveCTe7bH
— President Biden (@POTUS) December 22, 2021
The coronavirus pandemic began spreading across the world in March 2020. In response, countries like the United States implemented lockdowns.
This led to millions of student loan borrowers having no way to pay their debts. According to the Federal Reserve, that amounts to 45 million Americans who owe a total of $1.7 trillion!
When President Donald Trump signed the CARES Act and declared a pause on student loan payments, it was President Joe Biden’s turn once his term was done.
His first extension’s deadline was January 31, 2022. However, he saw that people needed more help because of the impacts of the pandemic and the threat of the Omicron variant.
That’s why the Biden administration is extending the pause for an additional 90 days. Now, the pause will last until May 1, 2022. This only applies to federal student loan borrowers.
If you are one, you should still check if your loans qualify. If they do, you won’t have to submit monthly payments and interest for a while. This includes defaulted loans as well.
US Secretary for Education Miguel Cardona said that he would continue working with borrowers to provide the best loan servicing and repayment options.
Read More: Student Loan 101 Guide
How should I respond to the Biden student loan pause?
If you’re thinking of just putting your feet up during the pause, think again. The Biden student loan pause is a deferment period, meaning you will still have to pay your loans after that.
This only applies to federal student loan payments. If you have private student loans, you will have to speak with your provider for ways to facilitate payoff.
No matter what type of loan you have, you should still pay them every month. That way, you won’t have a huge amount to pay once Biden’s student loan pause ends.
Another reason why you should pay during that time is because of the 0% interest. Now that you don’t have to pay interest, your payments will deduct from the debt’s original amount.
If not, you could use the time to pay other debts instead. Perhaps this could be the time to get rid of credit card debts, auto loans, or other unpaid balances.
You could look at the other relief programs from the Education Department. Perhaps you could make student debt payoff easier with the following options:
- Changing repayment plans – You might want to try turning your current student repayment plan into an income-driven one. That way, you could limit the monthly payments from 10% to 20% of your discretionary income.
- Loan consolidation – You could turn multiple student loans into one with a lower interest rate, so you get lower monthly payments.
- Student loan forgiveness – The government provides this in various ways. For example, the public service loan forgiveness (PSLF) requires borrowers to perform a role in public service and submit 120 monthly payments. After that, you will not have to pay the remaining balance.
- Perkins Loan Cancellation – If you have a Federal Perkins Loan, you could get it canceled if you have a job that meets the requirements.
Other things to do during the pause
You might want to rethink your finances during Biden’s student loan pause. Create a budget plan by performing the following steps:
- Figure out your monthly income minus taxes. If you don’t have a job yet, determine the amount of money you have every month.
- List all your monthly expenses and separate your “needs” and “wants.”
- Compare that list with the amount of money you have every month, and see if any funds are left.
- Either remove or reduce the unnecessary expenses. For example, you could get rid of your YouTube TV subscription if you already have Netflix. If you like buying from Whole Foods, maybe you could check out Walmart for cheaper options.
- Do steps one to four again after a month to see how it went. If you need more money, perhaps you could spend even less.
You could try the 50-30-20 rule for this too. That’s half of your take-home pay for your needs, 20% for savings and debts, and the remaining 30% for other stuff you like.
What’s more, you could try getting a side gig. It’s a lot easier nowadays because of the remote work trend. You can find many jobs that will let you earn during the student loan pause.
Both of these should provide extra money for an emergency fund. Place the money from that 20% into a savings account or keep them somewhere safe at home.
If you need more financial aid, visit the Federal Student Aid website. It will provide all you need to know about President Biden’s student loan pause as well.
For more money management tips, check out the other articles at Financial Daily Updates. It’s a great way to build financial literacy and learn more about investments.