Post-college life

4 smart money moves for your student loan payments

A quick recap: the majority of federal student loans are automatically in forbearance until Dec. 31, 2020, with 0% interest and no penalties to borrowers). If you’re a beneficiary of this relief, there are many ways you can use this opportunity to work towards your financial goals, depending on your particular situation.


This could be the time to make some seriously smart money moves. Take advantage of this moment to set yourself up for success – whether that’s making a dent in that federal loan principal, building up that rainy day fund, or getting rid of high-interest credit card debt.


As with all financial decisions, pick what’s best for you. But, we’ve broken down some of the benefits of each path:


Pay off your debt.

We’re not talking about only student loans here, but all debt – credit cards, car payments, mortgage, etc. It is likely that one of these other types of debt carries higher interest than your student loans. Debt borrowed at a higher interest rate literally costs more, so paying it off faster results in real savings. If you can make additional payments toward these loans, you can make a serious dent in how much money you repay overall. 


Here’s some quick math: Let’s say you have a $20,000 car loan at 8% interest for 6 years. If you made just one extra payment per year, you’d save more than $500 (and pay off your loan 6 months sooner).


To figure out the best move for you, use our easy Student Loan Relief Calculator to figure out which type of debt makes the most sense to tackle first (Go to File > Save a Copy to create an editable version for yourself).


Have cash on-hand.

We all need a rainy day fund. Whether it’s a global pandemic, sudden layoffs, unexpected health concerns, or a combination of all three (and more), life and finances can get complicated.


Studies show that only 25% of Americans have a rainy day fund, and of those funds, most do not have enough to cover 3 months of living expenses. Now is a great time to build this safety net or further build up your existing one.


Extra credit: Rather than simply set aside your student loan payments in a typical savings account (the average APY from a big bank is only .01%-.05%), opt for a short-term CD or high-interest savings account. This way, you can access your money quickly, and it will be earning even more interest over time.


Of course, if you prefer to stuff your cash under your mattress... we won’t judge 😉


Get those student loans paid off.

If your other debt is in good order and your rainy day fund is ready to go, go ahead and keep paying off your student loans. Since interest rates are at 0%, any payments you make will go directly towards your principal. You’ll save money in the long term and be finished with your payments sooner!


Extra credit: Rather than simply continue to make your student loan payments on a monthly basis (which is totally fine), set aside your payments in a short-term CD or high-yield savings account. Then, make one big payment before the forbearance expires on Dec. 31, 2020 – including that extra interest you made. Every little bit helps!


Help others.

No matter your financial situation, if you want to do more right now, there are many organizations that are making a difference for those who need it most. If you have the financial bandwidth, consider donating to charity (even small amounts can make an impact). Here are some ideas to get you started (all highly rated by Charity Navigator):



No matter what you choose to do, we hope not having to make your student loan payments at this time is helping you breathe just a little easier.


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