Paying Down Student Loans Before the COVID Suspension Is Lifted

    If you are paying on a federal student loan, you probably already know that the government CARES Act has provided benefits that suspends payment and interest requirements through December 31. That has been a godsend to those who lost their jobs in the wake of the COVID-19 pandemic.

    That relief, however, isn’t the only advantage of the CARES Act. If you’re still earning an income, it’s an opportunity for you to reduce your student debt faster than you could before.

    Just because you aren’t required to make loan payments during this grace period doesn’t mean you shouldn’t.

    Why You Should Continue to Pay Your Student Loans During the Pandemic

    With interest charges suspended for federal student loan borrowers, whatever payments you make before the end of the year go directly to reducing the amount you owe.

    It’s a simple equation:

    • The more you pay now, the smaller your loan balance.
    • The smaller the balance, the faster you can pay it off.
    • The faster you can pay it off, the less interest you’ll pay over the life of the loan.

    You can do this by continuing to make the normal monthly payments, even though they aren’t currently required. If you make extra payments, contact your lender and make it clear you want these payments to apply to your principal.

    But to take advantage of this, you need to get started. New Year’s Day will come before you know it.

    Should I Consolidate or Refinance My Student Loans During the Pandemic?

    If they’re federal loans, don’t even consider refinancing until January 1. Currently, you aren’t accruing interest on these student loans, but that will change if you refinance them privately.

    Refinancing federal student loans can be beneficial if you can find a better loan rate – either a lower one, or changing a variable interest loan into a fixed interest rate, or vice versa. Naturally, a lower rate could mean lower payments. Reducing your interest rate by 1% or more is worth considering. Use an online loan payment calculator to see if this makes sense for you.

    For example, if you owe $50,000 in student loans at 5% interest, you’re paying about $530 per month. For every 1% drop in interest, you’ll save about $24 per month, which you can keep or use as a principal payment to pay off the loan faster.

    Realize that this eliminates some of the federal loan protections, such as deferring payments if you’re unemployed, experiencing an economic hardship or on active-duty military service. The deferment protections offered by federal student loans are much stronger than those offered by private loans.

    If you have private student loans, refinancing makes sense if you can find better rates, and current rates are at record lows. How low depends on your income and credit rating.

    What Else Can I Do to Pay off My Student Loans Faster?

    Your current student loan repayment plan may not be best for you. Switching from an income-driven repayment plan to a standard repayment plan could help you pay down loans more quickly if you can handle a higher monthly payment.

    Sign up for autopay. Federal loans and some private lenders offer a 0.25% interest rate discount when they can automatically deduct payments from your bank account. Contact your loan servicer to find out if the discount is available.

    Ask whether your employer offers tuition reimbursement or student loan forgiveness. Companies with student loan repayment benefits aren’t always good about making them known. Ask.

    Are Private Student Loans Suspended?

    The CARES Act and the executive order that extended it to year’s end did not suspend payments for private student loan holders. So, you should be making payments as usual on those loans unless your private lenders offered a forbearance period allowing you to temporarily postpone payments. Even in that case, interest will continue to accrue on private loans, so you should keep making monthly payments.

    Get Help

    If you aren’t confidant that you know enough to make the right decision, call a nonprofit credit counselor for advice on how best to deal with it.


    Bill Fay
    Staff Writer

    Bill “No Pay” Fay has lived a meager financial existence his entire life. He started writing/bragging about it seven years ago, helping birth into existence as the site’s original “Frugal Man.” Prior to that, he spent more than 30 years covering college and professional sports, which are the fantasy worlds of finance. His work has been published by the Associated Press, New York Times, Washington Post, Chicago Tribune, Sports Illustrated and Sporting News, among others. His interest in sports has waned some, but his interest in never reaching for his wallet is as passionate as ever. Bill can be reached at

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