How to Take Advantage of the Student Loan Relief Extension

Written by: Ashley Perlmutter

If you’re juggling federal student loan debt along with other bills, you’re about to get another pandemic-related break. Those of you who lost a job during the pandemic and now need to decide whether to pay their student loan debt or buy groceries can hold off making federal student loan payments through Sept. 30. The temporary pause for federal student loan payments had originally been set to end Jan. 31 for more than 42 million borrowers.

This change means that the interest rate on many federal student loan payments stays set at 0% for another eight months. But keep in mind, millions of private student loan payments and some federal student loans aren’t covered by this deal.

This loan deferral program has allowed many people a chance to breathe and pay down other debt or get back on their feet during these challenging times. Some families may be able to use this time to pay off high-rate credit card debt or other bills. Others, if able, might try to set aside extra cash to create or beef up their emergency fund.

The temporary financial break, which was first announced in March, was extended twice last year and then again, most recently at the request of President Joe Biden, who took executive action on the matter on his first day in office.

It’s important for borrowers to consider signing up for income-driven repayment plans while the pause is in place. In this case, in the months when they’re not required to make a payment will count in their favor with some income-driven plans that offer loan forgiveness at the end of a 20-year or 25-year period. Furthermore, you might want to consider an income-driven repayment plan to help you avoid defaulting if your total student loan debt at graduation exceeds your annual income, especially if you want to pursue Public Service Loan Forgiveness.

In general, since monthly payments are calculated based on borrowers’ incomes and family sizes, these types of plans may be more affordable than other options. 

Typically, experts say, borrowers should opt for the repayment plan with the highest monthly payment that they can afford so that the interest doesn’t keep building over the long run. 

Will there be another pause in payments after September? The Biden administration has left open that possibility, but borrowers would be wise to take advantage of what they know is available right now. 

The risks are high for failing to repay student loans. Borrowers can face collection fees; wage garnishment; money being withheld from income tax refunds, Social Security, and other federal payments; damage to their credit scores; and even ineligibility for other aid programs, such as help with homeownership. 

Going forward, Biden has proposed forgiving up to $10,000 in federal student loans for borrowers. But borrowers have no guarantees that such a change will take place or when. So, right now it’s important to take a realistic look at your overall financial situation and try to use the next eight months to your advantage. There is pending legislation to forgive student loans, so make sure to stay tuned for updates to come. If you have any questions related to your student loans and your strategy to repay them, please contact us at

Related: Millennials Top $10 Trillion in Assets for First Time