How to Prepare for the Pause on Federal Student Loan Payments

What you need to do to prepare accordingly for October 1st, 2021

The CARES Act that passed on March 27, 2020, paused federal student loan payments through Sept. 30, 2021 and temporarily set the federal student loan interest rate to 0%. The pause has provided significant relief for the roughly 42 million Americans who owe federal student loans. But the policy is set to expire on Oct. 1, 2021.

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Below are some proposed tips to help you prepare when payments resume.

  1. Check if your lender has up-to-date contact information since you might have moved during the pandemic. You can confirm that the lender has the right info just logging into your account online. That way, you will hear directly from the lender all the relevant information on when you will resume payment.
  2. 2. Create a personalized plan for when federal student loan payments resume. It could be great if you can continue to pay down your student loan during the pause to pay your loan principal faster. Also, if you can, begin building a student loan payment back into your monthly budget by putting payments into a savings account so you are prepared when October 1st
  3. Check your balance so you can make the right financial decision based on your budget. You might consider enrolling in an income-driven repayment plan, especially if your income has changed during the pandemic.

Analyze how your finances may have changed since the pandemic started. Are you changing your living and work situation? Has your income changed? Understanding your new budget and lifestyle will allow you to make the right decision for you!


Eligibility for a grant is based on demonstrated financial need, which is the difference between the college’s cost of attendance (COA) and the expected family contribution (EFC). Colleges and universities use the EFC to determine eligibility for institutional need-based aid.

Eligibility for state grants, like the Cal Grants and New York TAP Grants, often involves an income cutoff. Many states also award financial aid to students who are residents of their states and offer programs such as the Tuition Exchange Program that allow residents to attend institutions in another state at the in-state tuition cost or a discounted cost.

To apply for grants, file the Free Application for Federal Student Aid (FAFSA) at as soon as possible on or after October.

What are student loans?

There are two types of school loans for student borrowers: federal student loans and private student loans.

Federal student loans are disbursed by the U.S. Department of Education. Student borrowers qualify for either subsidized or unsubsidized loans. Federal student loans are the rock stars of the student loan world for one simple reason: lower, fixed interest rates. However, federal student loans have both annual and aggregate limits. 

So, even with scholarships and grants, federal student loans may not be enough to cover your entire college education. If that’s the case, private student loans may be your next best option.

Private student loans are given out by banks, credit unions, and online lenders. Interest rates on private student loans tend to be higher, and many don’t offer students the same protections as federal student loans, such as grace periods, income-based repayment options, and postponement options.


Here again, FAFSA plays an important role. When you apply for FAFSA, you’ll learn if you qualify for federal student loans. These are the rock stars of the student loan world for one simple reason: lower interest rates.

Eligibility requirements for federal subsidized student loans

  • You’re a U.S. citizen.
  • You demonstrate financial need.
  • You’ve applied or enrolled as an undergraduate student. Grad students are not eligible for subsidized loans. 
  • Subsidized loans are available for both part-time and full-time students, thought you must be enrolled at least half-time.

Eligibility requirements for federal unsubsidized student loans

  • You’re a U.S. citizen.
  • You’ve applied or enrolled as an undergraduate student, graduate student, or professional student. 
  • Unsubsidized loans are available for both part-time and full-time students, thought you must be enrolled at least half-time.

Eligibility requirements for private student loans

Most private student loan providers determine loan eligibility based on a defined set of characteristics that paint a picture of your credit worthiness. Each lender is different, but typically, your citizenship, credit history, and annual income of you and/or your cosigner are all taken into account before you’re approved for a student loan. 



Thankfully, the application process for both federal and private student loans is relatively simple. To apply for federal student loans, all you have to do is fill out and send in your FAFSA form. You can complete the FAFSA online here.

If you’re also applying for private student loans, you can do so directly on the lender’s website. Be sure to apply after you’ve applied and accepted all the grants, scholarships, and federal student loans you can before applying for private student loans.

Sources of Grants and ScholarshipsBoth grants and scholarships come from the following sources.


Federal and state governments are sources of gift aid.

  • The federal government is the largest source of need-based gift aid, primarily in the form of the Pell Grant.
  • State governments often fund grants and scholarships for residents attending college in their state.


Many colleges offer grants and scholarships to their students.

  • These may be merit based or need based, or a combination of the two.
  • Colleges may have stricter requirements for keeping a scholarship than do other sources of scholarships.

Private Organizations

Many companies, foundations, community organizations and clubs sponsor grants or scholarships. Grants and scholarships from these private organizations are called outside, or private, scholarships.

Here are some examples of possible sources of outside scholarships:

  • Your parents’ employers or labor unions
  • Your family’s religious center
  • Organizations such as the National Association for the Advancement of Colored People (NAACP), 4-H and the Boy Scouts of America

Three Steps to Tap into Grants and Scholarships

To apply for grants and scholarships, you’ll most likely have to fill out financial aid forms such as the Free Application for Federal Student Aid (FAFSA) and the CSS Profile®. Outside scholarships usually have their own application forms and application processes.

  1. Complete the FAFSA

You must fill out the FAFSA to qualify for federal aid. Many states and colleges use the FAFSA to award aid as well.

  1. Find Out What Financial Aid Forms Your College Requires

Apply for your college’s gift aid by filling out the required forms. In many cases, this will be the FAFSA, but some colleges require the CSS Profile or their own forms. Contact the college financial aid office to find out. Then submit the required forms on time.

  1. Research and Apply for Outside Scholarships

Start by talking with your school counselor about how to find outside scholarships. To apply for an outside scholarship, you’ll probably have to fill out an application form, and you may also have to submit financial aid forms.

  • Interest and monthly payments on federally held loans are suspended through September 30, 2021.
  • You do not need to contact your student loan servicer or take any action on your federally held student loans.
  • Make sure your servicer has up-to-date contact information and check your mail or email so you can receive any updates or information about your loans.
  • Suspended payments through September 30, 2021 will count towards any student loan forgiveness program, as long as all other requirements of the loan forgiveness program are met.


How to Prepare for the Pause on Federal Student Loan Payments