If you’re not paying student loans now, what other money moves should you be making?

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If you have a federal student loan, you probably already know the federal government has suspended payments, interest and collections activities through Dec. 31, 2020. This means that for the remainder of the year, you can skip loan payments on most federal student loans without facing interest accrual or penalties. Your “skipped” payments will even count toward Public Service Loan Forgiveness (PSLF) if you’re currently pursuing it, and you won’t be penalized if you’re on an income-driven repayment plan, either.

You can continue making payments on your student loans as well, which is a good idea if your goal is paying off debt as fast as you can, since every dollar you pay now will go directly toward your principal balance. But experts agree that there are other smart money moves you could be making instead. After all, interest is not accruing on your student loans, so you could put the money you would be paying toward other financial goals.

Pay down private student loans

Millennial money expert Robert Farrington of The College Investor says that if you’re not making federal student loan payments right now, you could consider focusing your efforts on your private student loans.

Since private loans were not included in this temporary forbearance, you have the opportunity to double up on private student loan payments and knock out this element of your debt even faster.

Who this is best for: Borrowers with both federal and private student loans.

Pay down high-interest debt

Private student loans may not be the best debt to attack if you have high-interest debt weighing you down. If you have credit card debt with an average interest rate over 16 percent, for example, then that’s the best place to throw any extra funds. The same is true for auto debt or personal loan debt with high APRs. Simply put, the higher the interest rate of the debt you focus on, the more money you can save.

Farrington says that, given the economic headwinds and uncertainty ahead, eliminating as much debt as possible “can give you breathing room in your future budget.”

Who this is best for: Borrowers with large credit card balances or other forms of high-interest debt.

Build an emergency fund

Financial adviser Mark Reyes of Albert says that if you don’t have one already, you can also consider putting money toward an emergency fund. Reyes says that having three to six months of expenses covered is ideal.

After all, a job loss, a loss in income or a major medical scare could make it difficult to pay bills in the future. With a fully funded emergency fund or some savings set aside, on the other hand, you could buy some time while you get back on your feet.

Not only that, but having an emergency fund can help you avoid having to rack up debt when you fall behind, says financial adviser Christopher Struckhoff of Lionheart Capital Management in Irvine, California. Without an emergency fund, Struckhoff says that it’s easier to wind up in a position where you have to turn to credit cards to get by, and that can force you into a cycle of racking up high-interest debt that can be difficult to pay off.

Who this is best for: Borrowers without six months’ worth of emergency funds.

Save for another goal

Skipping federal student loan payments also paves the way toward saving for specific goals you have, says Reyes. If you’re trying to save for a new car or a home remodeling project, for example, using some of your loan payment savings toward these goals can be a smart move.

Depending on your timeline, Reyes also says to consider a high-yield savings account so you can earn interest on your savings. While high-yield savings accounts aren’t paying very high rates right now, any interest is better than nothing, and many of the best high-yield savings accounts on the market today can be opened with low account minimums and no ongoing fees.

Who this is best for: Borrowers saving up for a home or a car.

Boost your retirement contributions

If you have an emergency fund and you don’t have any other debt to pay off, then Reyes says that you could also consider setting some of your funds aside for retirement.

“General recommendations are to allocate 10-15 percent of your income towards a retirement account, such as a 401(k),” he says. “If you can contribute more, the better.”

If you are fine with your workplace retirement contributions and don’t want to change them, you can also consider setting up or adding to another retirement account. For example, eligible individuals can contribute up to $6,000 across a traditional or Roth IRA account in 2020, or $7,000 if you’re age 50 or older.

Who this is best for: Borrowers who haven’t invested much into retirement accounts.

How to prepare for the end of student loan forbearance

Maybe you just want to hold onto the funds you would normally pay toward your loans to see how things go. You could always set aside your loan payment amount through the end of the year, then make a lump-sum payment toward the end of the forbearance period.

Either way, there are some steps you should take as you prepare for loan forbearance to end and payments to once again become due. If you believe that you’ll have trouble making loan payments due to economic hardship, you should call your loan servicer to see what options are available to you. You may be able to apply for a traditional deferment or forbearance period for your federal student loans, or you may be able to switch into a different repayment plan (like an income-driven repayment plan) with a longer repayment timeline and a lower monthly payment amount.

Next year may also be an excellent time to refinance your student loans with a private lender. You’ll give up some access to protections like deferment or forbearance and income-driven repayment plans if you refinance federal loans with a private lender, but record-low interest rates could help you qualify for substantial savings.

Whatever you do, have a plan for your loan funds so you don’t squander them away. Jan. 1 will be here before you know it, and so will your next student loan bill.

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