{"id":120885,"date":"2021-09-03T15:19:47","date_gmt":"2021-09-03T15:19:47","guid":{"rendered":"https:\/\/fin2me.com\/?p=120885"},"modified":"2021-09-03T15:19:47","modified_gmt":"2021-09-03T15:19:47","slug":"student-loan-borrowers-have-4-more-months-without-payments-how-to-make-the-most-of-the-extra-cash","status":"publish","type":"post","link":"https:\/\/fin2me.com\/business\/student-loan-borrowers-have-4-more-months-without-payments-how-to-make-the-most-of-the-extra-cash\/","title":{"rendered":"Student loan borrowers have 4 more months without payments. How to make the most of the extra cash"},"content":{"rendered":"<ul>\n<li>For most borrowers, student loan payments won&#x27;t be due until 2022. <\/li>\n<li>Experts weigh in on the best ways to spend the extra cash until then.<\/li>\n<\/ul>\n<p>Life without student loan payments has come to feel normal for many.<\/p>\n<p>Borrowers, after all, haven&#x27;t needed to make a payment on their debt since March 2020, or for nearly a year and a half.<\/p>\n<p>But when the White House announced its most recent extension of the break last month, it said that it would be the final one.<\/p>\n<p>That means borrowers have just four more months without having to pay those bills.<\/p>\n<p>The typical student loan payment is around $400 a month, according to higher education expert Mark Kantrowitz.<\/p>\n<p><strong>More from Personal Finance:<\/strong><br \/>New York extends eviction protection for renters until Jan. 15<br \/>The 6-month health insurance subsidy for jobless Americans is ending<br \/>Child tax credit cut food hardship for 3.3 million families so far<\/p>\n<p>CNBC spoke with some experts about the best ways to handle that extra cash before next year.<\/p>\n<h2>1. Add to your emergency savings<\/h2>\n<p>The pandemic has taught us how important it is to have a healthy savings account to fall back on.<\/p>\n<p>People should try to build up at least six months&#x27; worth of expenses in cash should they have to live through a period of unemployment, he said.<\/p>\n<p>To get the best return on your cash, keep your money in a high-yield savings account, experts say.<\/p>\n<p>It&#x27;s worth shopping around with different banks to find the best offer. The\u00a0average online savings account rate\u00a0is 0.45%, while it&#x27;s just 0.13% with traditional brick-and-mortar banks and credit unions, according to DepositAccounts.com.<\/p>\n<p>&quot;It may not seem like much, but $100,000 earning 0.50% is $500 a year,&quot; aid\u00a0Allan Roth, founder of financial advisory firm Wealth Logic in Colorado Springs, Colorado.<\/p>\n<p>You&#x27;ll just want to make sure any account you put your savings in is FDIC-insured, meaning\u00a0up to $250,000 of your\u00a0deposit\u00a0is protected from loss.<\/p>\n<h2>2. Address credit card debt<\/h2>\n<p>With interest rates on most federal student loans at zero, it&#x27;s a good time to make progress paying down more expensive debt.<\/p>\n<p>The average interest rate on credit cards is currently more than 16%.<\/p>\n<p>However, make sure you have enough in your emergency savings account before you address credit card debt, said Ted Rosman, an industry analyst at Creditcards.com.<\/p>\n<p>That&#x27;s because your credit limit shouldn&#x27;t be relied on as a safety net.<\/p>\n<p>&quot;Many people had their credit card limits cut unexpectedly over the past year as lenders got especially worried about risk,&quot; Rossman said.<\/p>\n<p>But assuming you have an adequate cash cushion, knocking down credit card debt can save you a lot of money.<\/p>\n<p>Rossman provided an example: If you&#x27;re carrying $5,500 in credit card debt and make only the minimum payments each month, you&#x27;ll be stuck paying for more than 16 years and shell out an extra $6,163 just in interest, assuming your getting dinged the average fee.<\/p>\n<p>If you dedicate an extra $400 per month for just the next four to that balance, however, it&#x27;ll trim almost three years off that schedule \u2014 and you&#x27;ll save $2,162 in interest by doing so.<\/p>\n<p>Morgan Hopkins, a director of political strategies at a national nonprofit, has paid off more than $17,000 in credit card debt during the payment pause for student loan borrowers.<\/p>\n<p>And that&#x27;s opened other doors for her.<\/p>\n<p>&quot;I&#x27;m able to save more, invest more in retirement,&quot; Hopkins, 32, said. &quot;It&#x27;s such a relief.&quot;<\/p>\n<h2>3. Consider still paying your student loans<\/h2>\n<p>If you have a healthy rainy day fund and no credit card debt, it may make sense to continue paying down your student loans even during the break.<\/p>\n<p>With interest temporarily suspended, any payments will go directly toward your debt&#x27;s principal, potentially shortening your repayment timeline.<\/p>\n<p>&quot;You could continue making payments each month by contacting your servicer, or save the money and make a\u00a0lump sum payment on your highest-interest loan before interest accrues again when repayment restarts,&quot; said Anna Helhoski, student loan expert at NerdWallet.com.<\/p>\n<p>There&#x27;s a big caveat here, however. If you&#x27;re enrolled in an income-driven repayment plan or pursuing public service loan forgiveness, you don&#x27;t want to continue paying your loans.<\/p>\n<p>That&#x27;s because months during the government&#x27;s payment pause still count as qualifying payments for those programs, and since they both result in forgiveness after a certain amount of time, any cash you throw at your loans during this period just reduces the amount you&#x27;ll eventually get excused.<\/p>\n<h2>4. Other options<\/h2>\n<p>Some borrowers may want to invest the extra cash. They&#x27;ll likely thank themselves later for doing so. The S&amp;P 500 Index is up more than 20% for the year.<\/p>\n<p>Another possibility: If you&#x27;re financially comfortable during the pandemic and it doesn&#x27;t make sense for you to continue paying down your student loans, then donate the extra cash.<\/p>\n<p>You can make sure an organization is reputable using tools like the Better Business Bureau&#x27;s Wise Giving Alliance or Charity Navigator, Helhoski said.<\/p>\n<p>If the charity is registered as a 501(c)(3), you&#x27;ll even be eligible for a tax break.<\/p>\n<p>Source: <a href=\"https:\/\/www.cnbc.com\/2021\/09\/03\/student-loan-bills-are-still-on-pause-what-to-do-with-the-extra-money-.html\" target=\"_blank\" rel=\"noopener\">Read Full Article<\/a><\/p>\n","protected":false},"excerpt":{"rendered":"<p>For most borrowers, student loan payments won&#x27;t be due until 2022. Experts weigh in on the best ways to spend the extra cash until then. [&#8230;]<\/p>\n","protected":false},"author":3,"featured_media":120884,"comment_status":"closed","ping_status":"closed","sticky":false,"template":"","format":"standard","meta":{"footnotes":""},"categories":[6],"tags":[],"yoast_head":"<!-- This site is optimized with the Yoast SEO plugin v21.7 - https:\/\/yoast.com\/wordpress\/plugins\/seo\/ -->\n<title>Student loan borrowers have 4 more months without payments. How to make the most of the extra cash - Fin2me<\/title>\n<meta name=\"robots\" content=\"index, follow, max-snippet:-1, max-image-preview:large, max-video-preview:-1\" \/>\n<link rel=\"canonical\" href=\"https:\/\/fin2me.com\/business\/student-loan-borrowers-have-4-more-months-without-payments-how-to-make-the-most-of-the-extra-cash\/\" \/>\n<meta property=\"og:locale\" content=\"en_US\" \/>\n<meta property=\"og:type\" content=\"article\" \/>\n<meta property=\"og:title\" content=\"Student loan borrowers have 4 more months without payments. 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