Federal student loans: what to do with savings with paused loan repayments

CHICAGO (WLS) — With federal student loan payments now suspended until Aug. 31, that means more money can stay in many people’s pockets.

But what should people do with that money, and should they continue to repay their student loans as best they can?

For the next four months, people with federal student loans won’t be required to make any payments, nor will they pay interest. This is called adjournment.

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Certified Financial Planner Brian Gilder says there’s a lot you can do with that extra cash, but investing it shouldn’t be one of them.

“I would make sure my necessary expenses are paid before I do anything else,” Gilder said. “You want to make sure your food is paid for, your gas, your rent, or your mortgage.”

Another question people have is whether they should continue paying off their student loans if they can afford it. Gilder said he would always advise his clients to consider suspending payments.

“A lot of people are like, ‘If I make the payment, there’s a chance the government will forgive my student loan debt or part of it,’” Gilder said. “I think down the road what’s going to happen is we’re going to have some sort of compromise where a bill could pass and some of your student loan debt could be forgiven based on your income. .”

Gilder said you can also use the extra cash to build your emergency fund and save as much as you can while student loans are on hiatus until August.

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James V. Hayes