Your Student Loans & The Stimulus Package

The stimulus package was just passed and if you have federal student loans, hold on to your pants because there’s some good stuff in there to give you some relief. 

THE BASICS: federal student loans will automatically have their interest rates set to 0% for a 6 month period AND payments have been deferred. Meaning, you don’t have any payments for 6 months (through September 30, 2020)

So: no ballooning interest while you aren’t making payments. HUZZAH!

So what should we do with the money you were putting towards student loans? 

Here are a few scenarios to consider. 

1. I don’t have an emergency fund: Take that money you would have put towards your student loans and funnel it into a high interest savings account. We want liquid cash in times of economic downturn.  You can amp this up a bit more by making minimum payments on your credit cards and funneling any extra money you were paying towards these debts into savings. 

2. I have an emergency fund and credit card debt:  In this scenario, I want you to be sure that your emergency fund is AT LEAST 3 months of living expenses. If not, move money into savings.  If you have 3+ months in an emergency fund, you can use the money you would have put towards your student loans towards credit card debt. HOWEVER, I want you to be very focused and choose a method (like snowball or avalanche) so you are paying extra on one card at a time and minimums on the others. 

3. I have an emergency fund and no credit card debt: Congrats to you friend!  You have a couple of different options here. Keep making your payments on Student Loans for the next 6 months and try to make some progress in that principle (I’d do this). Or move that money towards another savings goal you might have or make an extra mortgage or care payment. 

TAKE NOTE

• This just passed, so it doesn’t hurt to check in with your federal loan provider just to be sure they are implementing. 

• The stopped payments and 0% interest will happen automatically. Still check in and make sure it is happening.  If it isn’t - contact your service provider but understand they might be slammed. 

• Borrowers with Perkins Loans and Federal Family Education Loans not owned by the U.S. Department of Education are not eligible for automatic forbearance. You can contact your provider and try for traditional forbearance. In this scenario you would still be accruing interest but if it frees up cash for survival...that’s the goal! If you can stick with your payments - I’d stick with them but if you can’t, no shame friend. 

• If you are part of the Public Service Loan Forgiveness (PSLF) program, your suspended payments will be treated as regular payments. 

• If you are enrolled in income-driven repayment (IDR), you will also be able to count these 6 months towards the forgiveness offered under your IDR plan. 

SET A REMINDER: 

Payments will start again in October 2020, so be sure to set a reminder in your calendar in September so you are prepared for the expense to reappear. 

ADD IT UP: 

Knowledge is power right?  Do this simple math to know what you are dealing with and to help put your mind at ease and make the decision that works best for you. 

1. Take your student loan payment and multiply it by 6

2. This is how much money you can:

   • put in savings to live off of

   • put towards credit card debt

   • put towards your student loan principal

   • put towards other debts

Stay positive friend.  We can get through this. 

Livin’ & Lovin’ 

Bri