Take your payments off ‘pause’

Pressing pause
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While it might be tempting to take advantage of these last weeks of the moratorium, making your regular payment — or paying more than you usually do — is a smart idea if you can afford it.

Since the interest rates on federal student loans are currently frozen at 0%, any payment you make now will go entirely toward the principal of your loan.

That means you’ll be able to take a much bigger chunk out of your debt than you normally would.

Keep in mind that if you’ve got private student loans you’re likely still responsible for your normal payments unless your lender has offered you a forbearance period.

Even then, your loan will be accruing interest, so you should continue to make your regular payments if possible.

Refinance private loans

Man on laptop
Vadym Pastukh / Shutterstock

If your student loans are from a private lender, you may be able to cut down your monthly cost by refinancing your loan into a lower rate.

Whether you qualify for refinancing will largely depend on your credit score and your current income.

If you’re not sure about your credit score, there are websites that will let you check it for free online and give you personalized tips on how to boost it if it’s not in great shape.

Even if you’ve lost your job due to the pandemic, you might still be eligible for a refi if you can demonstrate investment income or income from a side gig, or find a co-signer to back your application.

To get the best rate on a refinanced student loan, it’s important to shop around and compare quotes from multiple lenders using a free service like Credible.

Just remember that refinancing is not an option if you’ve got a federal student loan, and replacing a federal loan with a private loan will make you ineligible for any further loan relief measures from the government — that is, if they ever arrive.

Switch up your payment plan

Repayment plan
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You might be able to clear out your student loan debt faster by switching up your current payment plan.

Although an income-driven repayment plan can help to make your regular payments more affordable, switching to a standard repayment plan could help you become debt-free sooner — if you’re able to pay a bit more each month.

This option may not be right for everyone, especially for those struggling under current COVID-19 lockdowns.

Regardless of which payment plan you’re on, you should make sure to enroll in autopay if you’ve got a federal student loan.

Signing up for automatic deposits will qualify you for a quarter-point (0.25) interest rate reduction, which could be very helpful if rates return to their pre-COVID levels at the end of the year.

About the Author

Shane Murphy

Shane Murphy

Reporter

Shane is a reporter for MoneyWise. He holds a bachelor’s degree in English Language & Literature from Western University and is a graduate of the Algonquin College Scriptwriting program.

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