How to Take Advantage of the New Student Loan Freeze

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If you have government student loan debt, you now have three additional months to prepare for the resumption of payments on that debt.

President Joe Biden announced on Wednesday that his administration would extend the student loan repayment freeze again, this time through May 1, 2022. Payments should resume after January 31, 2022, which the administration previously dubbed the final extension.

This means that payments will not resume until next spring and interest rates will stay at 0%. According to a survey by The Pew Charitable Trusts earlier this year, two-thirds of borrowers said they would find it difficult to make payments if they resumed the following month.

“What a fantastic opportunity for borrowers to have more control over their finances,” said Laurel Taylor, CEO and founder of, a student debt repayment platform. “I would really encourage borrowers to maximize this opportunity – whatever that means to them.”

Pro tip

Make sure that your address and e-mail with your credit service provider are up-to-date so that you do not miss any important information about your student loan and the temporary extension.

That means any student loan debt you had prior to the COVID-19 pandemic will be waiting for you when repayment starts at the end of the grace period, unless policy changes again. Experts say you shouldn’t expect your debt to go away in the meantime, as it is unlikely to see any broad student loan going out – not even the $ 10,000 Biden promised during the campaign.

“I don’t see $ 10,000 student loan making. I just don’t think he can legally do this without Congress, ”said Robert Farrington, founder and CEO of The College Investor, a website that offers student loan advice. “But I think he can do a lot of good with his powers, for example reforming existing programs.”

Given Biden’s extension of the student loan facility, what should be done?

With this latest update in mind, now may be a good time to reconsider your student loan repayment strategy. Remember, the situation is different for everyone, but here is what you should do in light of the extension of the student loan payment freeze, according to the experts we spoke to.

If you have experienced a job loss or a decline in income

Use this time to give yourself free time to set other financial priorities. If you are unemployed or your income has decreased in the past year, continue to focus on covering your necessary expenses such as rent or mortgage payments, utilities, groceries, transportation, and the like.

“This relief is aimed at people who have lost their jobs or lost their income. I advise you to focus on the necessary cost of living and not worry about putting money aside for student loans because this time is for you, ”said Cindy Zuniga-Sanchez, Personal Finance Coach and Founder of Zero-Based Budget. a financial education platform on Instagram.

Another way to lower your monthly payment when due is to request an income-based repayment. An income-based repayment plan is a monthly payment based on your family size and a percentage of disposable income. If you earn less than 150% of the federal poverty line, your payments can be as low as $ 0.

To register, go to this page of the Federal Student Aid and click on “Register” above to start an application. If you are already enrolled on an income-based plan and your income has changed, ask your lender to re-certify your income before payments resume. If you make all of your payments on time, your loans may be waived at the end of the repayment period with an IDR plan – even if they are not repaid in full.

If you are unsure which repayment option is best for you, contact your loan service provider or visit

“Remember, your payments may not cover the interest on your loan, which means you could end up paying a significant amount of interest,” says Zuniga-Sanchez. “I want to issue this warning because it is very important to be informed as we make these changes to our student loan repayment strategies.”

If you still have a job or an income

You can use those extra months to divert some money towards building an emergency fund or to pay off more pressing high-yield debt like credit cards or personal student loans.

“Nobody should be making additional payments on their loans right now. Even if you can, you should be saving that money and reducing other debts, ”Farrington says.

If you haven’t already, the first thing to do is build an emergency fund. Try to set aside three to six months of spending, but don’t be overwhelmed if saving so much feels like an unattainable goal right now. Start small and go from there. Next, focus on paying back high-interest debt – these strategies can help you with that. You can also use additional funds to invest in retirement accounts like 401 (k), IRA, or Roth IRA, or to pay off lower interest rates you may have such as B. Medical debt or a car loan.

If you want to pay off your student loans during this 0% interest period, Farrington recommends putting that money in a savings account and then making a lump sum before payments begin again.

“That way, you’ll keep the money for as long as possible,” he says.

If you are behind with student loan payments

Since all collection activities will resume after the extension expires, try to rehabilitate your loans as soon as possible. Federal loan default occurs when a payment is 270 days overdue, sending your loans to debt collection agencies and exposing you to damaged credits, garnished wages, and collected tax refunds.

“Get out of late payments so that when payments and collections resume you won’t have to foreclose your wages or taxes,” says Farrington.

In order to rehabilitate your student loans and overcome the default, you need to contact your loan service provider, fill out an application and follow a certain procedure. If your application is approved and you make nine on-time payments, even during that grace period, your loans will usually be transferred to a new lender and you will be out of default.

If you can’t get credit rehabilitation at this point, there is additional procrastination and indulgence outside of COVID-19 relief that can give you more time to get back on your feet. For example, there is the postponement of unemployment and the postponement of economic hardship, both of which temporarily suspend payments on your student loans. But these options should be your last resort.

The bottom line

If you’re in the majority, chances are you haven’t made any student loan payments in almost two years. Even if the grace period has been extended, now is an excellent time to review your finances and come up with a plan to resume payments for the next year.

For example, you may now need to trim or readjust certain areas of spending so that there is still room in your 2022 budget when the payment is due. Based on the recent announcement, student loan payments are expected to resume in 2022 and better to stay ahead of the curve for as long as you can.

“The two-year suspension of student loan payments is unprecedented,” says Laurel, “and it is an opportunity for borrowers to move forward.”

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