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Student loan forbearance is extended through January 2021 but you should be planning for the future

The freeze on student loan payments has been extended through January, though borrowers may continue making principal-only payments at 0% interest.

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Federal student loan borrowers who were worried about payments resuming in January can relax for the time being. Last week, U.S. Secretary of Education Betsy DeVos announced the extension of the federal student loan administrative forbearance period through January 31, 2021.

The extension also applies to the current freeze on interest accrual and the suspension of collections activity, including wage garnishment against borrowers who defaulted on their federal student loans, according to a news release from the department. For those enrolled in a qualifying income-based repayment plan, loan rehabilitation agreement or Public Service Loan Forgiveness program, paused payments will still continue to count toward the number of payments you need to meet your requirements.

While this extension was not necessarily the solution that millions of Americans were hoping for, it gives at least 41 million federal student loan borrowers whose payments were paused under the CARES Act breathing room while Congress hopefully hammers out further stimulus measures.

The additional 30 days "allows Congress to do its job and determine what measures it believes are necessary and appropriate," said Secretary DeVos in the announcement.

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Currently, lawmakers are in negotiations over a bipartisan $908 billion coronavirus stimulus proposal that would reinstate the $300-per-week unemployment benefit and provide support for small businesses including the Paycheck Protection Program (PPP). However, talks hit another roadblock, and even if the proposed deal gets approved it would exclude a second round of $1,200 stimulus checks.

President-elect Joe Biden has talked extensively about more economic relief for the millions of Americans struggling as a result of the pandemic. On Friday, he stated that stimulus checks "may still be in play," and the Biden Emergency Action Plan, includes provisions for federal student loan borrowers to potentially get up to $10,000 of relief next year.

Of course, 2021 plans are mere speculation until we know the outcome of the Georgia runoff elections and Biden assumes office on Inauguration Day. If you've got federal student loans in your name, protect your credit score by making at least the minimum payments (currently $0 for many borrowers) and staying up-to-date on the latest news.

Don't miss: Biden has big plans for student debt relief—here are 3 possibilities to look for in 2021 and beyond.

How to plan for student loans possibly returning in February

Some speculate Biden will forgive at least $10,000 of student loans next year, but you should still plan for loan payments to resume in February.

Before getting too optimistic, make a "best case" and "worst case" scenario budget so that you have a plan for your money, no matter what happens.

To get a feel for what your worst-case scenario budget would look like, check with your federal loan servicer so you know the earliest possible date you could be on the hook to resume repayment. You'll likely get an email from them, or at least a message in your account inbox. Note the date on the calendar and make sure you're prepared financially with enough money in your account to cover the cost.

But just as important is your best-case scenario budget. In the short-term, think about how you might spend the money you ordinarily use for your monthly loan payment if the freeze continues. Maybe you have high-interest debt to pay off, or perhaps you want to use the extra cash to build up an emergency fund in a high-yield savings account like the Vio Bank High Yield Online Savings Account.

It's also good to think long-term about what it would be like if a portion (or all) of your student loans were forgiven. If Biden's stimulus plans make it through Congress, borrowers may be eligible for $10,000 of forgiveness, and some politicians are advocating for as much as $50,000. That could certainly shift things for borrowers, helping to make big dreams, such as homeownership or opening a business, a reality.

While the future is still uncertain, use this time in limbo to think about how you could make the most of whatever aid comes your way. A little planning can go a long way in helping you boost your finances.

Student loans and coronavirus:



Editorial Note: Opinions, analyses, reviews or recommendations expressed in this article are those of the CNBC Select editorial staff’s alone, and have not been reviewed, approved or otherwise endorsed by any third party.