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Navigating Student Loan Payments During the Pandemic Moratorium

Student loans can be a heavy burden on anyone’s finances, especially with the widespread economic effects of the ongoing pandemic. It’s important to know what types of federal student loans you have and what repayment options are available to you, particularly during the current moratorium.

In this article, we’ll discuss the different types of federal student loans and their repayment plans, as well as the different options available to those who wish to continue paying their loans during the moratorium.

Types of Federal Student Loans

There are two main types of federal student loans: subsidized and unsubsidized. Subsidized loans are loans that do not accrue interest while the borrower is in school, while unsubsidized loans accrue interest immediately after the loan is disbursed.

In addition to these two types of loans, there are also three different repayment plans to choose from. The first repayment plan is the standard 10-year repayment schedule.

This plan requires a fixed monthly payment for ten years and is the quickest way to pay off your loans. The second repayment plan is the income-driven repayment plan, which calculates your monthly payment based on your income, family size, and other factors.

This repayment plan is designed to make it easier for borrowers with lower incomes to repay their loans. Lastly, there is the graduated repayment plan, which starts with lower payments and then gradually increases every two years.

Options for Loan Payments During Moratorium

The current loan moratorium puts a freeze on all payments and interest on federal student loans through September 30, 2021. However, there are still a few options available to those who wish to continue paying their loans during this time.

One option is to invest the money that you would have used to pay your loans into a long-term investment account. This approach can help you build long-term wealth and could potentially lead to a higher return than the interest on your student loans.

Another option is to open an interest-earning savings account and deposit the money that you would have used to pay your loans. By depositing the money into an account with a high-interest rate, you can earn money on your savings while also having it readily available when the moratorium ends.

Importance of Paying Student Loans During Moratorium

Despite the current moratorium on federal student loans, it’s still important to consider paying off your loans. Here are a few reasons why continuing to pay your student loans during the moratorium could be beneficial in the long run.

Credit Score Improvement

Paying your loans on time and in full can help improve your credit rating. Your credit rating is an important aspect of your overall financial health and can affect your ability to get a mortgage, credit card, or other loan in the future.

By making timely loan payments, you can show lenders that you are responsible and have good credit-worthiness.

Accomplishing Long-Term Goals

By continuing to make your loan payments during the moratorium, you can make significant progress towards your long-term financial goals. For example, if you are looking to purchase your first home, having less student loan debt can help you qualify for a mortgage, which will make purchasing a home more attainable.

By taking steps now to reduce your debt, you’ll be better positioned to accomplish your financial goals in the future.

Faster Loan Repayment

By continuing to make loan payments during the moratorium, you can reduce the amount of interest that accrues on your loans, which could ultimately lead to a faster repayment time. With less interest accruing, more of your monthly payments will go towards the principal balance, which can help you pay off your loans more quickly.


In the end, what you decide to do during the current loan moratorium will depend on your individual circumstances and financial goals. While taking advantage of the current pause on federal student loan payments might seem appealing, it’s important to consider the long-term effects on your financial health.

Ultimately, whether you choose to continue paying your loans or not, it’s important to stay informed about your options and make the best decisions for your unique situation. The current loan moratorium on federal student loans provides some much-needed financial relief to many borrowers.

Over the last year, the pandemic has caused financial hardship for countless individuals across the country. While many people have lost their jobs, others have had their salaries reduced, leading them to be in dire financial straits.

If you are struggling financially, the loan moratorium may be an opportunity to take advantage of the financial benefits of not making student loan payments. Here are three benefits of not making payments during the moratorium.

Building Emergency Fund or Saving for Retirement

If you have been struggling to save up a rainy day fund, the moratorium on student loan payments can free up some of your cash. By setting money aside in an emergency fund, you can put yourself in a better position to handle unexpected expenses such as a medical bill or car repair.

Additionally, if you have been looking to start a retirement fund, this could be a good opportunity to open a Roth IRA and start making contributions. A Roth IRA is an individual retirement account that allows you to save money for retirement while also offering tax benefits.

The contributions you make to a Roth IRA are made with after-tax dollars, which means that the money grows tax-free. You can withdraw the money tax-free once you reach retirement age.

Starting a Roth IRA can help you ensure that you have a comfortable retirement, and the moratorium on loan payments can help you find the money for these contributions.

Setting Money Aside

If you are in financial straits due to the pandemic, the loan moratorium can be a good opportunity to set money aside for when you need it most. You can either build up an emergency fund or start investing in a long-term investment account.

Ideally, you should aim to save three to six months’ worth of living expenses in an emergency fund. Doing so can provide you with a financial cushion if you suddenly find yourself out of work, and can help you avoid taking on high-interest debt, such as credit card debt.

For those who are looking to invest, setting money aside can allow you to build wealth over time. Investing in stocks and bonds can yield higher returns than a savings account or certificate of deposit, which can help you build wealth over time.

You could consider investing in a tax-advantaged account, such as an Individual Retirement Account or a Roth IRA. The funds in these accounts grow tax-free, which could potentially lead to higher returns.

Getting Refunded Money

One of the most significant benefits of the moratorium is the opportunity to receive refunded money. The Federal Student Loan website offers refunds to borrowers who have made payments during the moratorium.

This means that if you have made payments in the last year, you will get a refund for those payments. The refunded money can be used to pay down high-interest debt, build up your emergency fund, or even invest in a long-term investment account.

However, it’s important to note that you will not receive any interest on the refunded money. So, while it’s a good opportunity to get back the money that you have already paid, it doesn’t offer much long-term financial benefit.

Still, the refunded money can offer temporary relief, especially if you are in dire financial straits.


In short, the loan moratorium on federal student loans provides borrowers with much-needed financial relief. While it’s important to consider the long-term consequences of not making payments, there are also some financial benefits to taking advantage of the moratorium.

By building an emergency fund, starting a retirement fund, and setting money aside, you can help put yourself in a better financial position. Additionally, with the opportunity to receive refunded money, the moratorium provides borrowers with temporary relief during this challenging time.

Ultimately, it’s up to each individual borrower to decide what the best course of action is for their financial situation. In summary, the article has discussed the financial benefits associated with making or not making student loan payments during the pandemic moratorium.

Despite the relief that the suspension on student loan payments provides to many borrowers, there are financial implications that individuals must weigh during this period. Borrowers must consider the potential long-term benefits of continuing to make payments during the moratorium, such as improving their credit score, accomplishing long-term goals, and faster loan repayment.

On the other hand, borrowers in financial difficulty can also take advantage of the moratorium to set money aside for emergency funds, saving for retirement, and receiving refunded money. Ultimately, borrowers must evaluate their unique financial situation to decide whether to continue making payments or take advantage of the lending freeze.

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