Scholar mortgage payments are paused. What to do with the additional cash

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1. Add savings to your emergency

The pandemic taught us the importance of having a healthy savings account that we can fall back on.

People should try to top up spending in cash for at least six months if they have been unemployed for a period, he said.

To get the best return on your cash, keep your money in a high-yield savings account, experts say.

It pays to browse different banks to find the best deal. According to, the average interest rate on online savings accounts is 0.45%, while traditional brick-and-mortar banks and credit unions are only 0.13%.

“It might not seem like much, but $ 100,000 earning 0.50% is $ 500 a year,” said Allan Roth, founder of financial advisory firm Wealth Logic in Colorado Springs, Colorado.

Just make sure that every account you deposit your savings into is FDIC insured, which means up to $ 250,000 of your deposit is protected from loss.

2. Address credit card debt

With zero interest rates on most federal student loans, it’s a good time to make progress in paying off expensive debts.

The average interest rate for credit cards is currently over 16%.

Make sure you have enough in your emergency savings account, however, before dealing with credit card debt, said Ted Rosman, industry analyst at

That’s because you shouldn’t rely on your credit limit as a safety net.

“A lot of people unexpectedly cut their credit card limits last year because lenders were particularly concerned about the risk,” Rossman said.

But provided you have adequate cash reserves, you can save a lot of money by reducing credit card debt.

You could keep making payments every month … or save the money and make a one-off payment on your maximum interest loan before interest accrues again …

Anna Helhoski

Student Loan Expert at

Rossman provided an example: If you have $ 5,500 in credit card debt and you only make the minimum payments each month, you will have to pay for more than 16 years and pay an additional $ 6,163 as interest only, assuming you get the average fee.

However, if you only spend an additional $ 400 per month on these funds for the next four months, it will cut that schedule nearly three years – and save you $ 2,162 in interest.

Morgan Hopkins, a director of policy for a national nonprofit, paid off more than $ 17,000 in credit card debt during the student loan debt hiatus.

And that opened other doors for her.

“I can save more, invest more in retirement,” said Hopkins, 32. “It’s such a relief.”

3. Consider continuing to pay off your student loans

If you have a healthy rainy daily allowance and no credit card debt, it can make sense to continue paying off your student loans during the break.

Because interest rates are temporarily suspended, all payments are added directly to the principal of your debt, potentially shortening your repayment period.

“You can continue to make payments every month by contacting your servicer, or you can save the money and make a lump sum on your loan with the highest interest rate before interest accrues again when the repayment starts again,” said Anna Helhoski. Student loan expert at

There is one major caveat here, however. If you’ve signed up for an income-based repayment plan or are looking to get public service loans, you don’t want to keep paying your loans.

That’s because months during the government’s pause in payments are still considered qualifying payments for these programs, and since both lead to forgiveness after a certain amount of time, any cash you throw on your loans during that time will only reduce the amount when which you finally get excused.

4. Other options

Some borrowers may want to invest the extra money. You will likely thank them for it later. The S&P 500 index is up more than 20% over the year.

Another option: If you are financially well off during the pandemic and it makes no sense for you to continue repaying your student loans, donate the extra money.

You can make sure an organization is reputable by using tools like the Better Business Bureau’s Wise Giving Alliance or the Charity Navigator, Helhoski said.

If the charity is registered as 501 (c) (3) you are even eligible for a tax break.

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