Are you one of the many borrowers who’s student loans were impacted by the COVID-19 relief measures? Anyway you look at it the measures may be coming at just the right time and can be incredibly helpful. Unsure if you should use this as a chance to pay off student loans while in quarantine? Let’s talk about it!
In April the decision to grant student loan relief during the Covid-19 pandemic was made official. For those students with Federal Student Loans, interest has been dropped to 0% until September of 2020 and loans were automatically placed in a state of deferral. This deferral and interest rate drop is retroactive back to March 13th! Woohoo!
For those who have been balancing insanely large loan payments this is a nice reprieve. For those who haven’t been able to make payments, well, this is at least a nice chunk of time where your interest isn’t accruing. If you’re unsure about whether your loans qualified or just have some additional questions about the whole loan student loan relief plan. Here’s an article that does a great job of putting all the info in one place!
So let’s get into it.
Have you been impacted by the COVID-19 closures?
Have you been furloughed? Lost income? Been layed-off? Or maybe your spouse has and now you are providing the sole income… or worse, there’s no income? Then I highly recommend not making any kind of additional payments on your loans.
If the quarantine restrictions have hit you hard your one job is to keep your family fed and roof over your head. If it’s possible to put money into an Emergency Fund, go for it!
Do you think that there’s a chance you could be impacted in the future, same idea. Don’t start throwing extra at your loans until you’re secure that you have either, enough savings OR job security. Consider yourself in Storm Mode and start preparing for the potential of tough times ahead. If we get through the worst of this and you haven’t needed to use your Emergency Fund you can always apply it to debt later on.
Just know that this can’t last forever and you can come back from anything! Keep taking care of yourself!
Is work stable and your needs are met?
If your work is stable and you’re not in danger of your income being compromised, then you should be safe to keep paying on your debt. The thing is, don’t throw extra money at debt unless you feel your needs are safe.
Security looks different for everyone. You may feel completely comfortable with $1,000 in your savings account. Me personally, that doesn’t cut it for our needs. I always tend to keep more in our savings and with the current COVID situation I’ve upped it considerably more. Even if you’re just dropping a little extra to savings each paycheck while continuing to pay off loans, go for it!
If quarantine has taught us anything it’s that life can change rapidly. Even a small fraction of money set aside goes a long way when the rug is pulled out from under you.
Did you pay your student loans before this all happened?
If you’ve followed my story you know I have been paying off my student loans since November 2019. I started with $60,000 and now hovering right around $45,000 as of April 2020. Paying off student loans has definitely been on the forefront of my more recent debt pay off journey. I have had a plan for what I’m paying, when I’m paying, and I had established an income based repayment plan so my minimums each month are low.
The fact that I have been so up in the grill of my student loans has actually be super helpful! For example, when I heard interest was being waved I did a happy dance! I could tell you exactly how much interest I was accruing each month (about 80% of my monthly payment was interest alone). I saw dollar signs flashing in happy neon letters and the sweet sirens of opportunity calling. Did you too feel this? It’s ok if the answer is no with an awkward side eye haha.
The thing is, this is huge news for you if your loans are included in this relief. If you haven’t been all mixed up in the kool aid of your loans prior to this, it is definitely time to get in there. Student loans are awful. They will make your life hell if they’re ignored! Right now they can’t really hurt you so it’s time to go exploring and see what you’re up against.
Anything you pay on these accounts right now is going straight to principal. STRAIGHT TO PRINCIPAL. Those words should give you shivers and make your heart swell. My friend, anything you put on these suckers right now goes further than it ever did! The larger your loans, the higher your interest rate, the more that money does for you. So jump in there and kills those loans like they’re pesky spring ants infiltrating your kitchen.
What happens when things go back to normal?
What is normal again? How will we know when we get there? Do you even remember what it used to feel like?
I have all the questions.
Eventually student loans will begin accruing interest again. It will be a sad, sad day. Once they do switch back on in September those balances you paid down won’t grow nearly as much interest. You’ll be in the habit of making payments, that is if you hadn’t been doing so before, and in an all around better place.
So keep at them. We’re in this together! Let’s pay these suckers down as hard as we can during this quarantine and get rid of ’em!