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How to Take Advantage of the Federal Student Loan Pause Until October 1, 2021

Kat Tretina
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Before You Read, Lower Your Student Loan Payment

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Before You Read, Lower Your Student Payment

It’s that quick & easy — really. Our free tool checks a network of top refinance lenders and shows you options in one easy chart.

Checking rates takes 2 minutes with no impact on your credit
Federal & private loans are eligible
No maximum loan amount

Under the Coronavirus Aid, Relief, and Economic Security (CARES) Act, some student loan borrowers got much-needed help with their debt.

These relief benefits were recently set to expire on January 31, 2021. But a major update occurred on newly inaugurated President Joe Biden’s first day in office.

On the first day of his presidency, Joe Biden issued a request to the U.S. Department of Education to further extend the pause on federal student loan payments and interest. Those student loan benefits are now officially set to continue until September 30, 2021.

This means that payments and interest charges will now resume after October 1, 2021.

Here’s how to take advantage of the CARES Act extension of student loan benefits, and what to do if you’re not eligible for the protections it offers.

The CARES Act and federal student loans

On March 20, the CARES Act was first passed to help student loan borrowers during the coronavirus pandemic. It had multiple features to assist borrowers who lost their jobs or had experienced losses of income because of COVID-19:

  • It suspended loan payments: From March 20 until September 30, all loan payments were automatically suspended. Borrowers could skip their minimum monthly payments without going into default.
  • It stopped collections on defaulted student loans: For the duration of the CARES Act, all collections activity on defaulted loans were halted.
  • It set interest rates to 0%: Interest rates on all eligible federal loans were reduced to 0%, preventing loan balances from growing while payments were suspended.

However, not all student loans qualified for the CARES Act benefits. Only federal Direct Loans were eligible.

Other types of student loans, including Federal Family Education Loans, Perkins Loans, and private student loans, were ineligible.

The CARES Act student loan freeze and payment suspension was recently set to expire on January 31, 2021.

However, on his first day as President, Joe Biden and the U.S. Department of Education further extended the payment suspension until September 30, 2021.

How to take advantage of the CARES Act extension and benefits

The CARES Act benefits are automatic; there are no actions you need to take if you have eligible Direct student loans. Your loan servicer will suspend your payments and set your interest rate to 0% for you.

Until September 30, 2021, you don’t have to make any payments, and no interest will accrue on your qualifying loans.

To make the most of this time, consider these tips.

1. Use your student loan payments for your living expenses

If you lost your job or your hours have been reduced because of the pandemic, the CARES Act benefits can give you some extra money for your essential expenses. According to the Federal Reserve, the average student loan payment is $393.

Since you don’t have to make payments right now, that means you have an extra $393 each month you can use to pay rent, buy groceries, or pay your utility bills.

2. If possible, continue making student loan payments to reduce your principal

If you are still employed and can make ends meet, the CARES Act gives you a great opportunity to reduce your student loan balance and save money over time.

Until September 30, 2021, your interest rate is set at 0%. Any voluntary payments you make through the end of the year will go entirely toward the loan principal rather than accrued interest, helping you pay off your loans faster.

3. Continue working toward loan forgiveness

If you work for a government agency or non-profit organization, make sure you follow the requirements for Public Service Loan Forgiveness and maintain your status as a full-time employee, if possible. Even though your loan payments are suspended, the CARES Act specifies that the suspended payments count as PSLF-qualifying payments.

Without having to pay a dime toward your loans, you’ll get credit toward the 120 payments required for loan forgiveness as long as a qualifying employer employs you at the time.

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4. Build up your emergency fund

The coronavirus pandemic highlighted just how important an emergency fund is. Even if you had a healthy safety net, the past few months may have depleted your savings account. You can use this time to bolster it back up to give yourself a cushion.

If you started to tuck away your usual student loan payment each month, you could build up a sizable savings account by the end of the January.

5. Pay down high interest debt

If you have high-interest debt, such as a credit card balance, this is a good chance to make extra payments and reduce your interest charges.

The Federal Reserve reported that the average credit card interest rate for all accounts that assess interest was 15.78% as of May 2020. With such a high interest rate, you could pay much more than you originally charged because of interest fees. If you only pay the minimum payment due on your credit card each month, your balance can quickly get out of control.

By applying your usual student loan payment to your credit card statements, you can reduce your balance and save money.

6. Contribute to your retirement account

When you have student loans, it can be hard to save for other goals like retirement. The Federal Reserve reported that 42% of adults between the ages of 18 and 29 have no retirement savings at all. But the earlier you start, the better off you’ll be later on, and the more time your money has to grow.

If your employer offers a 401(k), use the money you would have used for student loan payments to start making contributions. If you don’t have an employer retirement plan, open up an Individual Retirement Account (IRA) on your own with a brokerage firm.

7. Come up with a plan for October 2021

While the CARES Act can be incredibly beneficial, you can’t rely on it for long-term relief. It will expire at the end of September 2021, so it’s important to come up with a plan to manage your loans for October.

  • Apply for an income-driven repayment (IDR) plan: If you can’t afford your monthly payments, you can apply for an IDR plan. IDR plans base your monthly payments on your discretionary income and family size. Depending on your situation, you could qualify for a dramatically lower payment. You can apply for an IDR plan online.
  • Consider forbearance or deferment: If you lost your job or have an ongoing medical emergency, you may qualify for forbearance or deferment. You could temporarily postpone your payments even after the CARES Act expires. Contact your loan servicer to see if you qualify.

What to do if you have private student loans

Unfortunately, private student loans aren’t included in the CARES Act. Rather than being issued by the government, private loans are issued by individual banks, credit unions, and online lenders and they have different interest rates and terms. The government doesn’t control private lenders like they do federal student loans and the Department of Education.

If you have private loans and are trying to figure out how to lower your student loan payment or how to lower student loan interest rates, consider student loan refinancing.

When you refinance your loans, you may qualify for a lower interest rate, allowing you to save a significant amount of money over time.

Or, you can extend your loan term to reduce your monthly payment. Refinancing can be an effective tool for managing and accelerating your loans and can provide you with some relief.

If you decide that refinancing is right for you, use Purefy’s Compare Rate tool to get quotes from top refinancing lenders.

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Ascent Rate Disclosure

Ascent’s undergraduate and graduate student loans are funded by Bank of Lake Mills or DR Bank, Member FDIC. Loan products may not be available in certain jurisdictions. Certain restrictions, limitations; and terms and conditions may apply. For Ascent Terms and Conditions please visit: www.AscentStudentLoans.com/Ts&Cs.

Rates are effective as of 12/1/2023 and reflect an automatic payment discount of either 0.25% (for credit-based loans) OR 1.00% (for undergraduate outcomes-based loans). Automatic Payment Discount is available if the borrower is enrolled in automatic payments from their personal checking account and the amount is successfully withdrawn from the authorized back account each month. For Ascent rates and repayment examples please visit: www.AscentStudentLoans.com/Rates.

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SoFi Rate Disclosure

3 SoFi Rate Disclosure:

Fixed rates range from 4.49% APR to 8.99% APR with a 0.25% autopay discount. Variable rates from 5.09% APR to 8.99% APR with a 0.25% autopay discount. Unless required to be lower to comply with applicable law, Variable Interest rates on 5-, 7-, and 10-year terms are capped at 8.95% APR; 15- and 20-year terms are capped at 9.95% APR. Your actual rate will be within the range of rates listed above and will depend on the term you select, evaluation of your creditworthiness, income, presence of a co-signer and a variety of other factors. Lowest rates reserved for the most creditworthy borrowers. For the SoFi variable-rate product, the variable interest rate for a given month is derived by adding a margin to the 30-day average SOFR index, published two business days preceding such calendar month, rounded up to the nearest one hundredth of one percent (0.01% or 0.0001). APRs for variable-rate loans may increase after origination if the SOFR index increases. The SoFi 0.25% autopay interest rate reduction requires you to agree to make monthly principal and interest payments by an automatic monthly deduction from a savings or checking account. This benefit will discontinue and be lost for periods in which you do not pay by automatic deduction from a savings or checking account. The benefit lowers your interest rate but does not change the amount of your monthly payment. This benefit is suspended during periods of deferment and forbearance. Autopay is not required to receive a loan from SoFi.

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Earnest Rate Disclosure

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Actual rate and available repayment terms will vary based on your income. Fixed rates range from 5.44% APR to 9.99% APR (excludes 0.25% Auto Pay discount). Variable rates range from 5.97% APR to 9.99% APR (excludes 0.25% Auto Pay discount). Earnest variable interest rate student loan refinance loans are based on a publicly available index, the 30-day Average Secured Overnight Financing Rate (SOFR) published by the Federal Reserve Bank of New York. The variable rate is based on the rate published on the 25th day, or the next business day, of the preceding calendar month, rounded to the nearest hundredth of a percent. The rate will not increase more than once per month. The maximum rate for your loan is 8.95% if your loan term is 10 years or less. For loan terms of more than 10 years to 15 years, the interest rate will never exceed 9.95%. For loan terms over 15 years, the interest rate will never exceed 11.95%. Please note, we are not able to offer variable rate loans in AK, IL, MN, NH, OH, TN, and TX. Our lowest rates are only available for our most credit qualified borrowers and contain our .25% auto pay discount from a checking or savings account.

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Earnest Rate Disclosure

Rates displayed include the 0.25% Auto Pay discount. You can take advantage of the Auto Pay interest rate reduction by setting up and maintaining active and automatic ACH withdrawal of your loan payment from a checking or savings account. The interest rate reduction for Auto Pay will be available only while your loan is enrolled in Auto Pay. Interest rate incentives for utilizing Auto Pay may not be combined with certain private student loan repayment programs that also offer an interest rate reduction. For multi-party loans, only one party may enroll in Auto Pay. It is important to note that the 0.25% Auto Pay discount is not available while loan payments are deferred.

Actual rate and available repayment terms will vary based on your income. Fixed rates range from 4.67% APR to 16.15% APR (excludes 0.25% Auto Pay discount). Variable rates range from 5.64% APR to 16.45% APR (excludes 0.25% Auto Pay discount). Earnest variable interest rate student loan origination loans are based on a publicly available index, the 30-day Average Secured Overnight Financing Rate (SOFR) published by the Federal Reserve Bank of New York. The variable rate is based on the rate published on the 25th day, or the next business day, of the preceding calendar month, rounded to the nearest hundredth of a percent. The rate will not increase more than once per month. Although the rate will vary after you are approved, it will never exceed 36% (the maximum allowable for this loan). Please note, Earnest Private Student Loans are not available in Nevada. Our lowest rates are only available for our most credit qualified borrowers and contain our .25% auto pay discount from a checking or savings account. It is important to note that the 0.25% Auto Pay discount is not available while loan payments are deferred.

Nine-month grace period is not available for borrowers who choose our Principal and Interest Repayment plan while in school.

Earnest clients may skip one payment every 12 months. Your first request to skip a payment can be made once you’ve made at least 6 months of consecutive on-time payments, and your loan is in good standing. The interest accrued during the skipped month will result in an increase in your remaining minimum payment. The final payoff date on your loan will be extended by the length of the skipped payment periods. Please be aware that a skipped payment does count toward the forbearance limits. Please note that skipping a payment is not guaranteed and is at Earnest’s discretion. Your monthly payment and total loan cost may increase as a result of postponing your payment and extending your term.

Loan Eligibility criteria: Eligible students must: 1) For college Freshmen, Sophomores and Juniors, attend, or be enrolled to attend, a Title IV school full-time. For college Seniors and Graduate students, attend, or be enrolled to attend, a Title IV school at least half-time; and 2) be pursuing a Bachelor’s or Graduate degree. Earnest private student loans are subject to credit qualification, completion of a loan application, verification of application information, self-certification of loan amount, and school certification.

Responsible borrowing tip: Explore all scholarship, grant and federal options before applying for a private loan.

Earnest Private Student Loans are made by One American Bank, Member FDIC. One American Bank, 515 S. Minnesota Ave, Sioux Falls, SD 57104.

Earnest loans are serviced by Earnest Operations LLC, 535 Mission St., Suite 1663 San Francisco, CA 94105, NMLS #1204917, with support From Navient Solutions, LLC (NMLS #212430). One American Bank and Earnest LLC and its subsidiaries, including Earnest Operations LLC, are not sponsored by agencies of the United States of America.

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ELFI Rate Disclosure

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Education Loan Finance is a nationwide student loan debt consolidation and refinance program offered by Tennessee based SouthEast Bank. ELFI is designed to assist borrowers through consolidating and refinancing loans into one single loan that effectively lowers your cost of education debt and/or makes repayment very simple. Subject to credit approval. See Terms & Conditions. Interest rates current as of 10/13/2023. The interest rate and monthly payment for a variable rate loan may increase after closing, but will never exceed 9.95% APR. Interest rates may be different from the rates shown above and will be based on the term of your loan, your financial history, and other factors, including your cosigner’s (if any) financial history. For example, a 10-year loan with a fixed rate of 6% would have 120 payments of $11.00 per $1,000 borrowed. Rates are subject to change.

ELFI Rate Disclosure

Education Loan Finance is a nationwide student loan provider offered by Tennessee based SouthEast Bank. ELFI is designed to assist students financially with receiving their education. Subject to credit approval. See Terms & Conditions. Interest rates current as of 12/11/2023. Variable interest rates may increase after closing but will never exceed 18.00%. Interest rates may also differ from the rates shown above. The term of your loan, financial history, and other factors, including your cosigner’s (if any) financial history can affect the interest rate. For example, a 10-year loan with a fixed rate of 7% would have 120 payments of $11.61 per $1,000 borrowed. Rates are subject to change.

College Ave Rate Disclosure

College Ave Student Loans products are made available through Firstrust Bank, member FDIC, First Citizens Community Bank, member FDIC, or M.Y. Safra Bank, FSB, member FDIC.. All loans are subject to individual approval and adherence to underwriting guidelines. Program restrictions, other terms, and conditions apply.
Rates shown include autopay discount. The 0.25% auto-pay interest rate reduction applies as long as a valid bank account is designated for required monthly payments. If a payment is returned, you will lose this benefit. Variable rates may increase after consummation.
Minimum loan amount $1,000, as certified by your school and less any other financial aid you might receive.
This informational repayment example uses typical loan terms for a freshman borrower who selects the Deferred Repayment Option with a 10-year repayment term, has a $10,000 loan that is disbursed in one disbursement and a 8.35% fixed Annual Percentage Rate (“APR”): 120 monthly payments of $179.18 while in the repayment period, for a total amount of payments of $21,501.54. Loans will never have a full principal and interest monthly payment of less than $50. Your actual rates and repayment terms may vary.
Information advertised valid as of 1/1/2024. Variable interest rates may increase after consummation. Approved interest rate will depend on the creditworthiness of the applicant(s), lowest advertised rates only available to the most creditworthy applicants and require selection of full principal and interest payments with the shortest available loan term.

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