If you have federal student loans and you want to pay down your debt, there’s never been a better time to get started. With payments and interest on hold, the money you’re saving every month can work a lot harder for you if you apply it toward a more expensive line of credit.

This guide will show you how to pay down that debt quickly, helping you improve your financial position—with or without COVID-relief incentives.

Federal Student Loans vs Private Student Loans

Student loans come in two different flavors: federal student loans and private student loans. So the first thing you need to understand is which kind of loan, or loans, you have, and what each kind of loan means to your finances.

Federal student loans tend to have lower interest rates

Federal student loans are provided through the federal government. Your eligibility for these loans is determined by filling out a FAFSA every year: a Free Application for Federal Student Aid. Offered through the federal government, they usually come with advantageous interest rates. 

Private loans, on the other hand, are loans from private financial institutions. Because they aren’t funded by the government, their interest rates are usually much higher, which means they’re also more expensive to carry.

Private student loans are not on hold under the CARES Act 

When payments and interest on student loans were put on hold as part of the COVID-relief plan, that applied to federal student loans, not private student loans.

The system can seem confusing because some private banks also provided limited debt-relief options at the same time, but only federal student loan payments and interest were paused by the federal government.

As a result of the CARES Act, payments are not currently due on federal student loans, and they’re not accruing interest, even if you’ve stopped making payments. 

Private loans can’t be directly forgiven by the government

There’s been a lot of interest in the possibility of student loan forgiveness as part of a federal economic relief package, with discussion ranging from $10,000 to as much as $50,000. But any student loan forgiveness would apply to federal loans, not private loans.

That said, some people have suggested that the government could appropriate public money to pay down private student loans. It’s not exactly loan forgiveness (because the government would technically be paying it), but it would amount to the same thing when it comes to your wallet.

Still, there’s no guarantee that any more student loan assistance is on the way. Be prepared to have to pay those loans down eventually. 

But the pause on federal loans can still help—if you use the opportunity to pay down a higher-interest loan instead.

Using the Federal Student Loan Pause to Your Advantage

Just like student loans aren’t all the same, lines of credit aren’t the same either. Credit cards, for example, tend to have very high interest rates. They’re notorious for sucking people into growing debt that becomes incredibly hard to dig your way out of.

Why? For one thing, every time you use that credit card, you’re adding to your total debt—unless you’re paying the card off every month. With interest rates that compound over time, it’s easy to keep getting farther and farther behind.

But here’s the thing: you can get ahead by using the money you’re saving on federal loan payments to pay down more expensive debt, like credit card debt.

Of course, that’s only true if your specific loan is eligible for the 0% interest rate. Otherwise, you need to keep making those payments. The Department of Education offers more information here about which loans are eligible.

Remember, you don’t have to use those skipped federal student loan payments on credit card debt. You can use them to pay down any debt that has a higher interest rate than your federal student loan, helping you get ahead.

Pay Off Your Debt Even Faster with Good Financial Tracking

If you want to pay your debt off even faster, track your monthly spending and look for more places to save. An app like Simplifi by Quicken makes it easy to see where your money is going, helping you stay on top of your spending in less than 5 minutes a week.

1. Use Simplifi to save on subscriptions you don’t need

If you’re already using Simplifi, remember to check in on your bills & subscriptions list every few months to make sure you’re not paying for things you aren’t using. Most subscriptions are billed and paid automatically, making them easy to forget.

2. Use Simplifi to decide what to pay down first

Use Simplifi to connect all your credit cards and loans so you can see them all in one place. Simplifi makes it easy to see how much you owe where, so you can decide where your extra savings can do the most good.

3. Use Simplifi to track your debt-reduction goals

No matter which debt you decide to work on first, create a savings goal to track your extra debt payments. Celebrating each contribution along the way and seeing your progress add up can help you stay motivated.

4. Use Simplifi to set aside the money for your monthly goal

It’s tempting to spend extra money instead of using it toward your long-term goals. But using every spare penny toward the future isn’t any fun. 

Strike a balance by setting a specific goal amount, like that federal student loan payment you don’t have to make, and earmark that amount to pay down your debt.

In Simplifi, you can add it to your spending plan to make sure you don’t miss your target. In fact, that’s exactly what Simplifi is designed to do, striking a balance between the money you want to spend today and the money you want to put toward your future.

Life is full of ups and downs. But if you take advantage of everything Simplifi can do, you’ll have the flexibility you need to roll with the surprises, grab new opportunities, and reach your financial goals with confidence.