Good news, student loan borrowers: President Trump signed an executive order that extends the suspension of federal student loan payments until January 2021. Student loan payments were initially suspended under the CARES Act until late. September.
As the Education Department worried about student defaults and defaults (due to high unemployment), Trump extended the forbearance on student loans. As a result, about 35 million students get a break from paying federal student loans until the end of the year.
All that extra money can really help you out, especially if you are struggling with other debt. And, while splurging on spending might seem like fun now, you may regret it in the long run. You can explore all of your student loan options by visiting the Credible Online Marketplace today.
Here are some other (better) ways to spend the extra cash:
- Pay off credit card debt
- Pay off personal loan debt
- Pay off your mortgage
- Pay student loans anyway
1. Pay off credit card debt
The Federal Reserve reports that the typical monthly student loan payment is between $ 200 and $ 299. The average credit card balance among people in their 20s was nearly $ 2,800 in 2019, according to data from Experian.
So if you save $ 250 each month from September to December 2020 and invest that money to pay off your credit card balances, you would have $ 1,000 less in debt. Of course, this only works if you don’t make additional purchases on your cards.
Explore your many credit card options by visiting Credible.
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2. Pay off personal loan debt
Paying off personal loan debt can take time. But the money you’ll save by delaying your student loan payments might just be the motivation you need to get started.
If you are paying a higher interest rate on your personal loan, you may want to consider refinancing as interest rates are at their lowest. Visit an online marketplace like Credible to explore your personal loan options.
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Nishank Khanna, CFO of Clarify Capital, says, “Using extra cash to make payments during this interest-free period can help you move forward and save money over the life of your loan. Payments as low as $ 50 per month can make a huge difference, as every dollar applied goes directly towards the principle. “
Keep in mind that prepaying your personal loan can cost you money. Some lenders charge prepayment penalty fees. So you will need to balance the pros and cons of repaying your loan before it matures.
3. Pay off your mortgage
Using cash reserves to pay off your mortgage can free up cash each month. By making more aggressive payments on your mortgage, like $ 100 more each month, you will also own your property much sooner.
You will lose the mortgage interest tax deduction. And, while you will still have equity in your home after you pay off your mortgage, you won’t have any cash available.
Mortgage rates have fallen to their lowest level in many years, according to Freddie Mac, so you may want to consider refinancing your current mortgage.
Finding the best mortgage refinance rates takes time. You will need to compare the rates of several lenders. Credible allows you to compare multiple lenders to ensure you reach your personal financial goals. Find out how much you could save on your loan amount by refinancing now.
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Use an online mortgage calculator to determine your potential monthly payments.
4. Pay off student loans anyway
“Overall, students have a unique opportunity to pay off student debt faster if they choose to make payments during the student loan suspension period,” says Kalicia Bateman, student loan and student debt expert at BestCompany.
But make no mistake, loan forgiveness is not loan forgiveness and it is only a hiatus due to the coronavirus pandemic. If you can’t make your payments or choose not to, your debt will be waiting for you when the federal student loan suspension ends. If you continue to make payments on your student loans during the forbearance period, you will not pay any new interest. Your payment won’t be lower, but the 0% interest rate will save you money.
Even during this student loan forbearance period, it is still important to know the interest rate and terms of your student loans. Use an online student loan calculator to determine your costs.
What you do with the extra money you save during the break from paying off your student loans can have a positive or negative impact on your finances. It’s up to you. You can pay off credit card or personal loan debt, pay more each month on your mortgage, or continue to pay off your student loan during the forbearance period.
No matter what you do, consider all the pros and cons and explore all of your student loan options by visiting Credible today.