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How to Make the Most of the Pause on Student Loan Payments

Student loan payment relief under the CARES Act has been extended through September 30, 2021. Here's how to make the most of increased payment flexibility.

Student loan payments are paused for most federal student loans until September 30, 2021, thanks to an executive order signed by President Biden. In addition to suspended payments, interest rates are temporarily at 0%, and your account is considered to be in good standing.

For many consumers, halting student loan payments ease the financial pinch of the COVID-19 pandemic, making it easier to afford other bills and expenses. If the student loan forbearance has left you with some extra flexibility in your budget, there are a few ways you can make the most of it.

Catch up on past due bills.

You can divert your student loan payments to other bills you were past due on, especially utilities or rent. Even if there's a moratorium on service disconnection or evictions in your state, getting caught up now makes it easier to remain in good standing once the moratorium ends.

Fuel your savings.

If you've had to dip into your emergency fund during this pandemic, you're not alone. Rebuilding your savings will ensure you have a cushion to fall back on just in case you run into financial hurdles in the future. While having up to six months of living expenses saved up is ideal, even a small emergency fund of $1,000 can provide some much-needed support.

Pay down higher interest rate debt.

This could be a good time to get more aggressive with paying down your credit card debt, but only if you can afford to and if you already have an emergency fund in place. Paying off your credit card debt can save you thousands of dollars in interest and get you closer to being completely debt-free. Plus, paying down high credit card balances lowers your credit utilization and could boost your FICO® Score.

Keep making student loan payments if you can afford to.

Forbearance is automatic for federal student loans, which means your payments are paused, but nothing is canceled. While the Biden administration has discussed the possibility of student loan forgiveness, we don't know whether or when it will happen or how much student loan balance will be forgiven if a bill is passed.

In the meantime, you could continue making student loan payments to knock out some of your balance during this interest-free period. If you're not quite sure whether you'll need the money, you can stash your would-be payments in savings and then make a lump sum payment once you're more certain about your future income.

Pay more towards your private loans.

The COVID-19 forbearance only applies to federal student loans, and any executive order for canceling student loans wouldn't include private student loans. Because of these conditions, paying down private student loan balances may be more beneficial to you, especially on higher interest rate private student loans.

If you are impacted by the pandemic, you should definitely take advantage of the forbearance period to focus on your less flexible payments. However, if your finances are stable, you can improve your overall financial picture by paying down your loans or diverting those payments somewhere else.

LaToya Irby

LaToya Irby is a financial writer with over 14 years of experience. She's been quoted and published as a credit expert in several major publications including USA Today, U.S. News and World Report,, and The Chicago Tribune.