If you’ve been walloped by the economic fallout from the coronavirus pandemic, taking advantage of the federal student loan repayment suspension and interest freeze is a no-brainer. You can now stop making your payments and enjoy the six-month, interest-free period handed down by the U.S. government.

But what if you can afford to keep putting money toward your education debt? For you, taking advantage of the federal student loan interest freeze might mean something else entirely.

Here’s how to know…

- … when it makes sense to keep making federal loan payments
- … when it makes sense to sit back during the federal student loan interest freeze

When it makes sense to keep making federal loan payments

As you’ve likely heard, the government has enacted a six-month suspension of student loan payments — technically, an “administrative forbearance” — that allows most federal loan borrowers to take a penalty-free break from payment through Sept. 30, 2020.

And yet, continuing to make payments could be wise in the following scenarios:

1. You can still afford your monthly payment
2. You can afford a portion of your monthly payment

1. You can still afford your monthly payment

By continuing to make your usual monthly payment, you could take advantage of the federal student loan interest freeze instead of letting it pass you by. The upside to continuing your repayment is that you’ll now make much quicker progress toward a zero balance, thanks to the fact that 100% of your payment would be applied toward your principal balance.

Typically, loan servicers apply payments to fees, interest and then the principal (in that order). The lower your principal balance becomes during the federal student loan interest freeze, the less interest you’ll owe once it ends — that is how student loan interest works.

Say for example, you have a federal student loan balance of $33,545 (currently the national average) and a monthly payment of $276. Instead of having $158 of that $276 payment go toward the interest that accrued over the past month, all $276 would go directly toward your balance, whittling it down faster.

2. You can afford a portion of your monthly payment

The math here might be less impactful, but still potentially meaningful, as 100% of whatever you can afford to pay would go straight to decreasing your principal balance.

Talk to your federal loan servicer in this case. You could elect to keep your current repayment plan and submit a fraction of your original amount due each month. You might even ask your employer about helping you fill out the remainder of your payment — Congress has allowed employers to contribute up to $5,250 tax-free to employees’ student debt through the end of 2020.

Whether you receive employer-offered repayment assistance or not, you could also explore income-driven repayment (IDR) that would automatically cap your monthly payment as a percentage of your discretionary income (once repayment obligations resume in October). You could qualify for a monthly payment of as low as $0, depending on your income and family size.

Enrolling in an IDR would also ensure you sidestep delinquency or default come the fall season when payments are due again. It could lengthen your repayment term, however, leading to greater overall interest charge in the years ahead.

When it makes sense to stop repayment during the federal student loan freeze

If you’ve lost a job, have unpaid medical bills or have suffered another hardship, it’s likely wise to take the penalty-free pause on your federal student loans.

It might be less obvious, however, that you should also sit back in the following situations:

1. You drained your emergency fund
2. You have higher-interest debt to fend off
3. You’re working toward federal loan forgiveness

1. You drained your emergency fund

Knowing when to save money or pay off student debt is no easy question. The typical advice is to have three to six months’ worth of funds for your family’s expenses socked away for tough times. And in an unprecedented crisis such as the current coronavirus-affected economy, you and your family might want to lean toward the larger end of that spectrum.

If you’ve had to use some or all of your emergency fund already, it would likely be wise to rebuild it before resuming your federal loan repayment. This way, you’ll have a much better chance of affording your monthly payment once the clock runs out on the federal student loan payment suspension and interest freeze.

Say your emergency fund is half-full as a result of the coronavirus crisis. If you can replenish it in three months, you could always return to your repayment at the four-month mark. And if it takes six months, you might be better off staying on the sidelines until Sept. 30, 2020 (or later if the payment suspension is extended).

Instead of sitting back and relaxing, however, look at the federal student loan interest freeze as another new grace period. To make the most of it, start planning for how you’ll handle your repayment when it resumes. You might recession-proof your strategy, for example, if your job status isn’t as solid as it used to be.

Do you need to ask for the special administrative forbearance?

The massive coronavirus economic rescue package mandated that a six-month, interest-free forbearance be awarded automatically. While you don’t need to ask for it, it wouldn’t hurt to contact your loan servicer and talk through your options. You can track down your loan servicer here if you’re not sure who manages the debt.

2. You have higher-interest debt to fend off

Among the financial goals to prioritize before paying off student debt, ridding yourself of high-interest debt is at the top of the list.

With the federal student loan interest freeze in effect, you might also be seeking a break on your credit card or auto loan payments (particularly if the interest rates are in double digits). Short of that relief, it’s probably smart to prioritize paying off your higher-interest debt first, as called for by the debt avalanche method of debt management.

You might feel like you’ll miss out on potential savings by not contributing to your federal loan balances. But look on the bright side: As part of the March 27 economic rescue measures, your suspended payments will count as on-time and in-full payments, as reported by your loan servicer to the consumer credit agencies. Your credit score won’t be harmed — and, in fact, could be helped — by the federal student loan interest freeze.

Just be aware that you’ll have to re-enroll in autopay with your servicer once the federal student loan payment suspension ends.

3. You’re working toward federal loan forgiveness

Suspended payments still count toward achieving federal loan forgiveness, such as Public Service Loan Forgiveness (PSLF). If you’re progressing toward such relief, you’re likely already enrolled in an income-driven repayment program to keep your monthly payment low — and your ultimate forgiveness amount high.

Keep the same mindset during the federal student loan interest freeze. Even with repayment halted through Sept. 30, 2020, the payments you would have made do still count toward the 120 needed to reach the finish line — it’s as if you had made those payments anyway.

Say you’re among the 1.1 million-plus borrowers currently pursuing PSLF, according to our student debt data. You could add as many as six or seven “payments” (March through September 2020, depending on your payment due date) to your existing tally of the 120 straight timely payments to qualify for forgiveness.

One piece of fine print to sort through: You’d still have to fulfill other requirements of PSLF, such as working full-time for an eligible employer.

Editorial Note: This piece originally appeared on Student Loan Hero.

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