The federal student loan payment pause that began in March 2020 has ended. Loans began accruing interest on Sept. 1, and borrowers started making payments in October.<\/p>\n
But the restart comes at a tricky time for Americans\u2019 finances. Credit card debt is at a record high \u2014 $1 trillion, according to the Federal Reserve Bank of New York \u2014 and student loan borrowers may struggle to prioritize different types of debt.<\/p>\n
Credit card debt is especially damaging to your finances because of its high, compounding interest. As money gets tighter, consolidating your credit card debt under a zero- or low-interest product may be a smart move.<\/p>\n
With no student loan bills for the past three-plus years, borrowers may have used the space in their budget to take on other types of debt.<\/p>\n
More than half of all federal student loan borrowers took out a new bank-issued credit card during the pandemic, while 36% got an auto loan and 31% signed up for a retail credit card, according to a July\u00a0TransUnion study.<\/p>\n
Liz Pagel, senior vice president of consumer lending for TransUnion \u201cLenders made up for lost time, and then some,\u201d Pagel says. \u201cThere was just a lot of adding to credit, and consumers that had student loans in forbearance were not immune from that.\u201d<\/p>\n See<\/strong>: Is there a subprime credit-card crisis on the horizon?<\/p>\n It\u2019s not only new types of debt, but more of it. Borrowers with student loans face 24% higher median payments on other debt obligations than they did before the pandemic, the Consumer Financial Protection Bureau\u00a0reported in June. For younger borrowers ages 18 to 29, median payments have soared 252%.<\/p>\n The Biden administration announced a\u00a012-month \u201con-ramp\u201d\u00a0to ease the transition, during which missed federal student loan payments won\u2019t be reported to the credit bureaus, and you won\u2019t default. But loans will still accrue interest, so you should pay if you can.<\/p>\n Read<\/strong>: Student-loan borrowers waiting hours on hold and receiving incorrect information as payments resume<\/p>\n Though you want to make progress paying down all your debts, credit card repayment should be a top priority, says Rosario Chacon, a certified financial planner and certified student loan professional in Oakland, California.<\/p>\n \u201cIf worse comes to worst with the federal system, you can ask for forbearance,\u201d Chacon says. \u201cBut with credit cards, there\u2019s no forbearance to protect you.\u201d<\/p>\n \u201cCredit cards are so much less flexible than the federal student loan system,\u201d agrees Tricia Kollath, certified financial planner and certified student loan professional in Gulfport, Mississippi. \u201cYou can\u2019t call your credit card company and say, \u2018Oh, I can\u2019t make my payment this month.\u2019 They\u2019ll take you to court.\u201d<\/p>\n Both Chacon and Kollath suggest evaluating your budget as soon as possible to figure out how to keep paying down credit card debt as student loan payments restart.<\/p>\n One option may be consolidating your credit cards under a\u00a00% balance-transfer card or a debt consolidation loan, which saves money on interest and frees up additional cash.<\/p>\n With a 0% balance-transfer card, you transfer your credit card balances to the new card and pay off the debt at zero interest during the promotional period, sometimes 18 months or more. But these cards are available only to borrowers with good or excellent credit, generally scores above 689.<\/p>\n Fixed-rate debt consolidation loans are available to borrowers across the credit spectrum at banks, credit unions and online lenders. As long as you qualify for a rate lower than the rate on your credit cards, you\u2019ll save money on interest.<\/p>\n Read more:<\/strong> Do you know your credit card\u2019s interest rate? Here\u2019s how much a few percentage points can cost you over time.<\/p>\n If consolidating isn\u2019t an option, you can use popular DIY strategies, like the snowball or avalanche methods.<\/p>\n With the snowball strategy, you pay off your smallest debt first, then work your way up, applying newly freed-up funds to each new debt. This can help you build momentum as the amount you\u2019re paying on each debt grows.<\/p>\n With the avalanche strategy, you pay off the debt with the highest interest rate first, then work your way down, applying your increased savings in interest to each new debt.<\/p>\n Either is a great option for\u00a0tackling credit card debt, because you\u2019ll have a clear strategy you can follow, says Kollath.<\/p>\n \u201cWhenever I work with people who are in debt, they don\u2019t even want to talk about it, they\u2019re so stressed,\u201d she says. \u201cBut working towards a goal and seeing things get paid off is really good for your mental health.\u201d<\/p>\n
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\n says that while some debt acquisition was a natural result of young consumers aging into new credit obligations \u2014 like their first credit card \u2014 the issuing of new credit also jumped to levels not seen even before the COVID-19 pandemic.<\/p>\nConsolidating credit card debt<\/strong><\/h2>\n
Other strategies to pay off credit cards<\/strong><\/h2>\n