We are living in unprecedented times. The United States government suspended all federal student loan payments and all interest charges until December 31, 2020. In addition, collections and garnishments on student loan debt in default is halted. So you may be wondering, what on earth should I do with my student loans right now? Here are some ideas.

What you should do depends largely on whether you have federal or private student loans right now. If you only have private student loans, please scroll to the bottom half of this post. 

WHAT TO DO WITH FEDERAL STUDENT LOANS RIGHT NOW. 

If you have federal student loans, you should consider whether to:

KNOCK OUT OTHER DEBT BESIDES STUDENT LOANS RIGHT NOW. 

The first question you should ask yourself in trying to figure out what to do with your student loans right now is whether you have any other debt. Do you have credit card or literally any other debt that is currently accruing interest? If so, you should focus on paying off other interest earning debt at the moment. Use the money you would have used to make your student loan payment to pay off your other higher earning interest debt. I like to prioritize debt by highest earning interest debt first and work my way down to my lower earning interest, commonly referred to as the debt avalanche method. This method saves you the most money, which makes it the smartest, in my not-so-humble opinion.

KEEP MAKING PAYMENTS/MAKE EXTRA PAYMENTS. 

If you don’t have any other debt, another thing you should do with your student loans right now is continue making payments on your student loans so that you can get out of debt even faster. This of course, assumes that you do not intend to seek student loan forgiveness. If you are seeking student loan forgiveness, it doesn’t make sense to make extra payments because you want to have the most amount possible forgiven.

If you intend to pay off your loans on your own, making an extra payment makes sense because even though federal student loans are in a forbearance period, that time will simply be added on to the term of your loan. In other words, if you were on a standard 10 year repayment plan and would have paid your loans off by October 2025, you’ll now be done paying your loans by July 2026 if you don’t make any payments during this 9 month forbearance period. Making payments now will help you pay off your debt faster. 

ESTABLISH EMERGENCY SAVINGS.

Another thing you could do with your student loans right now is to hold off on making extra payments and start saving for emergencies. If you do not already have three months of emergency savings this is the path for you. In addition, if you are seeking student loan forgiveness (and thus would not benefit from making extra payments on your student loans) this is a path you should consider. Simply use the money that would have gone towards your student loans and put it in savings. 

START SAVING FOR RETIREMENT

If you already have at least three months of emergency savings, then you could start saving for retirement with the money you would otherwise be paying towards student loans. If you have three months but less than 1 year’s worth of emergency savings, I would split the payment in half and save half for emergencies and half for retirement. Since interest will not be accruing on your student loans but WILL be accruing on your retirement savings, you will actually earn more money by saving for retirement rather than paying off your loans. 

DON’T REFINANCE YET. 

One thing you should not do during this time is refinance your federal student loans. There is a time and place for some borrowers to refinance their federal student loans. This is not it. Now is not the time to refinance because you are currently getting the best rate on your loans– 0%! It’s not going to get any better anywhere else. Keep the protections you have with federal loans for the time being, even if you are certain that you intend to pay off your student loans on your own rather than seeking student loan forgiveness. When this forbearance period ends and interest starts accruing, you can start checking what kind of rates you can qualify for when you refinance.

MAKE EXTRA PAYMENTS ON PRIVATE STUDENT LOANS.

If you have both federal AND private student loans, you should use this time to make extra payments on your private student loans to get rid of them faster, especially if those loans have a high interest rate. If you are having trouble making payments on your private student loans, see below. 

WHAT TO DO WITH PRIVATE STUDENT LOANS RIGHT NOW.

CONSIDER FORBEARANCE.

If you are having trouble making payments on your private student loans right now, contact your lender. Almost all lenders are offering a forbearance period of up to 90 days so that you don’t have to make payments during this unprecedented time. On the other hand, if you aren’t having trouble making payments and have job stability, I would not put your loans in forbearance. Just continue to make your regular payments, that way, you can pay off debt even faster. 

PRIORITIZE EMERGENCY SAVINGS OVER AGGRESSIVE DEBT PAYMENTS.

If you do not have emergency savings, I would stop making any aggressive payments towards your student loans and start saving for emergencies until you have about 3 months worth of savings. You can also save for retirement but I would not aggressively save for retirement right now. Simply build your emergency savings and continue making debt payments if you can. 

[If you need help with debt, be sure to check out our “Debt Help” posts here.]

CONSIDER REFINANCING YOUR STUDENT LOANS RIGHT NOW.

If you aren’t having trouble making student loan payments on your private student loans, you should consider refinancing them. Interest rates on student loans are low right now and as such you may qualify for an even lower interest rate. You can check what kinds of rates you qualify for my clicking here (this will not impact your credit score). Lowering your interest rate is a very easy way to save thousands of dollars on your student loans. Note that if you have federal student loans (not private) please do not refinance your federal loans until interest on federal student loans begins accruing again. 

Still not sure what to do with your student loans? I highly recommend a consult with the Student Loan Planner. They’ll help you make sure you are on the right path. They saved us $200,000 on our student loans, I can’t recommend them enough! 

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