How to calculate how much you saved during the COVID-19 student loan pause

What is the COVID-19 student loan pause?

In response to the COVID-19 pandemic, the U.S. government paused loan payments and lowered interest rates to 0% for all eligible federal student loans. Starting on March 13, 2020, this payment pause went into effect automatically and allowed loan holders to focus their budgets on other necessary expenses while facing financial instability.

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Any payments made during the student loan pause went directly to the principal balance of your loan, or any interest accrued prior to when the pause was instated.

When will the student loan pause end?

Student loan borrowers will be notified before payments resume. Currently, payments are set to resume 60 days after June 30, 2023, unless the pause is further extended. Some federal student loans may also be eligible for student loan forgiveness.

Which loans were eligible for the student loan pause

Not all student loans were eligible for the payment pause and 0% interest rate. Eligible student loans include:

• Direct Loans, both defaulted and non-defaulted
• Federal Family Education Loan (FFEL) Program loans
• Federal Perkins Loans held by ED
• Defaulted FFEL Program loans not held by ED
• Defaulted HEAL loans

Some loans weren’t eligible for the student loan pause and continued to accrue interest:

• Private student loans
• Non-defaulted FFEL Program loans not held by ED
• Federal Perkins Loans not held by ED, defaulted and non-defaulted
• Non-defaulted HEAL loans

What happens if I made payments during the student loan pause?

If you made payments while student loan payments were paused, you’re able to request a refund for those payments. However, unless your loans have been canceled under the Student Debt Relief Plan, you’ll have to start paying your loans back when the payment pause ends.

How to calculate your student loan savings

While the federal student loan pause allowed you to temporarily stop making payments, you will likely have to pay them off when the pause ends. However, even if your principal balance remains the same when the pause ends, you’ll have saved a significant amount of money because of the lowered interest rates.

To calculate how much you saved during the student loan pause, you first need to figure out your daily interest rate before the pause started. Use this formula to find your daily interest rate:

• Daily Interest = Loan Balance x (Annual Interest Rate / Number of Days in Year)

If you had a student loan balance of $20,000 and an annual interest rate of 4%, your daily interest rate would be .0109% and the amount of interest your loans accrue each day would be about $2.19.

Since the student loan pause started on March 13, 2020, it’s simple to calculate the amount of money you’ve saved in interest since then, using this formula:

• Savings = Daily Interest x Number of Days During the Pause
  

If federal student loan payments resume 60 days after June 30, 2023, the total number of days since the pause started on March 13, 2020, would be 1,264 total days without accrued interest.

Multiply your daily interest amount by 1,264 to calculate your savings. For example, if your loans accrued $2.19 each day before the pause, you saved a whopping $2,768. Cha-ching!

Tips for paying off your student loans when payments resume

Even if the student loan pause helped you save money over the last few years, paying off the remaining balance of your student loans can be daunting. Try these strategies to make paying down your loans less overwhelming:

• Make additional payments when possible. If you’ve been able to set aside extra savings during the student loan pause, it’s a great idea to put that cash towards your loan when payments resume. By reducing your principal balance, you’ll pay off your loans faster and minimize the amount of interest you’ll pay over time.
• Consider consolidating your loans. If you have federal student loans, you have the option of combining some or all your loans. Student loan consolidation doesn’t lower your interest rates, but it may give you access to some protections and benefits like Public Service Loan Forgiveness.
• Set up automatic payments. Many lenders also offer small discounts on your interest rate when you use automatic payments.
• Make a monthly budget. Creating and sticking to a monthly budget makes paying off your student loans more manageable. Determine how much money you’re realistically able to set aside towards your student loans each month and stay consistent.
• Claim eligible tax deductions. Depending on your gross annual income, you might be eligible for a tax deduction for the interest paid during the year. You may be able to deduct up to $2,500 for both federal and private student loans.

Calculating how much you’ve saved during the student loan pause can help you understand how much accrued interest costs you over the lifetime of your loan. Whether you’re trying to pay off your debt quickly using the snowball method or just making your minimum payments, learning the ins and outs of your student loans will set you on the right track.