Is Student Loan Debt Stressing You Out?

Going to college and graduating from college are both causes for celebration. Yet, the student loan debt that often accompanies a college degree can be stressful. Are you stressed out by your student loan debt? When I graduated from college, I also had student loan debt. It took time but I diligently made my monthly payments until the loans were paid in full. Understanding your student loans and paying them timely are key.

When you are in your early to mid-twenties and have a college diploma in one hand, a bunch of student loan debt in the other, and may or may not have a job in your field, that can be a recipe for stress. Add Coronavirus to that and welcome to 2020/2021!

Here are 6 things you need to know about Student Loans to gain control over your financial future.

1. The CARES Act

Well, the good news is that the Federal Government gave some temporary relief on U.S. Department of Education (ED) federal student loans. On March 20, 2020, the office of Federal Student Aid began providing some temporary relief on ED-owned federal student loans: suspension of loan payments, stopped collections on defaulted loans, and a 0% interest rate.

Congress passed the Coronavirus Aid, Relief, and Economic Security Act (CARES Act) and it became law on March 27, 2020. The relief measures stated above were granted through September 30, 2020. These Coronavirus emergency relief measures, regarding ED federal student loans, have been extended multiple times. Another extension, granted on January 20, 2021, allows these relief measures to continue through September 30, 2021.

So yes, you have a little breathing room to make some calculated decisions on how you will pay your federal student loan debt. These temporary relief measures do not apply to private student loans. Look closely at what type of student loans you have.

Many students obtain their loans through FAFSA (Free Application for Federal Student Aid). FAFSA is how you apply for and obtain federal student loans. For private student loans you usually apply directly to the bank or financial institution.

2. Federal Student Loans

Congress sets the interest rates every year on federal student loans. Most federal student loans do not require a co-signer and a credit check is usually not required. Even students without good credit can obtain federal student loans.

Let’s talk about the different types of federal student loans:

  • Direct Subsidized Loans aka Subsidized Stafford Loans: The federal government pays the interest on these loans while you are in school, in your grace period after graduation, or when pausing your payments due to deferment. In deferment, no interest will accrue to your loan balance. If you are in forbearance, interest will accrue on your loan balance.
  • Direct Unsubsidized Loans aka UnSubsidized Stafford Loans: You are responsible for the interest at all times, including when you are in college. You are responsible for the interest from the time the loan is dispersed until it is paid in full. You can pay the interest while you are in college or let it accrue while you are in college. If you let the interest accrue during college, the interest will then capitalize and be added to the principal of the loan (see section on capitalization below).
  • Plus Loans: These are available to the parents of a dependent undergraduate student (enrolled at least half time in an eligible school) or to graduate or professional students. Plus loans usually have a higher interest rate, have an origination fee, and require a credit check.

When I was a student there was also the Perkins loan. These loans were low interest and available to students with exceptional financial need. Perkins loans were discontinued on September 30, 2017.

3. Private Student Loans

There are a multitude of lenders for private student loans. These private loans can have either a fixed or variable APR (Annual Percentage Rate), which is your interest rate stated as a yearly rate. An APR can also include fees, such as loan origination fees.

A variable APR is fixed to an index interest rate, such as the prime rate, (think of the prime rate as the rate banks give their best customers). The prime rate is influenced by the federal funds rate, which is the rate banks charge each other for short-term loans.

So you can see how it fluctuates: the prime rate in February 2021 was 3.25% but the prime rate in February 2020 was 4.75%. That’s a big difference. Also, remember your student loan APR is not likely going to be the prime rate- it will be higher. So if you obtain a private loan with a variable APR, it may start low and then rise over time.

When you have a fixed APR, the interest rate stays the same for the life of the loan.

In my classes and workshops, I always talk about how important it is to have a good credit score. This is another reason- the higher your credit score- the better interest rates you can obtain.

If you need to obtain private student loans, it pays to do your research up front. You want to be able to obtain the best loan repayment terms and interest rate as possible. There are websites such as NerdWallet that will summarize and compare student loans for you.

4. Refinancing Student Loans

I do also want to note that student loans can sometimes be refinanced. If you have high interest rates on your student loans you may want to look into refinancing them at a lower interest rate.

5. Interest Capitalization on Student Loans

Interest capitalization means when unpaid interest is added to the principal amount of your student loan. Interest is then charged on that now higher principal balance.

Under the CARES Act temporary reprieve, according to the Federal Student Aid website: “generally speaking, if you were up to date on your payments before the payment suspension period began, interest accrued prior to March 13, 2020, will not capitalize. This means no outstanding interest will be added to your principal balance when the payment suspension ends.”

“However, if you were in the type of deferment or forbearance in which interest would normally capitalize prior to the payment suspension period, then interest accrued prior to March 13, 2020, will capitalize when your original deferment or forbearance ends or when the payment suspension ends, whichever is later.”

“If you were in your grace period before the payment suspension period began, any outstanding or unpaid interest on your account will capitalize as it usually does when you enter repayment.”

6. Are There Benefits to Paying Your Student Loans During the Payment Suspension?

If you are able to make payments on your student loans during the CARES Act payment suspension, what is the benefit? The advantage is this: once you pay off the interest that accrued prior to March 13, 2020, the full amount of your loan payment would then be applied to your loan principal. This means you would ultimately pay off your student loan faster. It would also lower the total cost of your loan.

How do you know if you can afford to make payments on your student loan during the payment suspension? You can know by creating a monthly budget. You will hear me say over and over- a budget is one of the key building blocks to financial wellness and ultimately to financial freedom.

A budget:

  • Allows you to know what you earn and spend and adjust accordingly
  • Helps you to organize your financial life
  • Makes you accountable to yourself
  • Eases your stress and worry because you are in control of your money

There is freedom and beauty in a budget.

BONUS: Learn Core Money Skills & Positive Money Mindset

I have created a 3-hour live Zoom workshop: Student Fundamental Financial Skills that teaches core money skills and positive money mindset. This course is great for anyone 30 or under who wants to learn and implement necessary money skills into their life. Learn to make your money work for you.

  • WHEN: March 6th at 11:30 am EST is the next workshop.
  • PRICE: $59
  • PROMO CODE FOR 15% DISCOUNT: MoneySkills


Susan, The MoneyMaestra

Susan Howell
Written by: Susan Howell, The MoneyMaestra.

Even though I grew up without money, I was able to retire at 50 based on my financial practices. I worked for the Federal Government for 26 years, with 6 of those years at the IRS and 20 at the Department of Justice, which included investigating many money-related cases.

I created MoneyMaestra to share what I know and to help people get on the path to Financial Freedom.


  1. Karyn Keil

    Thanks for simplifying the loan repayment process. My daughter will begin paying back her student loans soon, and it is a big undertaking. Knowledge is power! Your class for Student Financial Freedom is a ticket to gaining that knowledge.

    • Susan Howell

      You are welcome Karyn! It is so important for students to understand exactly how the student loan financing and repayment work so they are timely with the payments and understand the details of their loans. Knowledge is power! I created my Student Fundamental Financial Skills workshop especially for young people so they can learn core money skills and positive money mindset at a young age. Understanding how to make your money work for you early in life is a game changer!


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