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So it has almost been a year since the news first broke out that the US government will be placing all federal student loan repayments on pause with 0% interest. I thought it was only going to last three months, to be honest. But after three (four?) extensions, I thought I should post an update on what you should be doing with your student loans. I hope you’ve been doing these things all along, but if not, that’s okay. We can pivot. Like this post, it’s better to be late than never.
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Hit other debts, hard. It’s no secret that I cannot stomach debt. Part of that is psychological, resulting from trauma regarding debt, but in general, I liken debt to a virus, leeching away at your resources while growing in size. The first thing I did after graduation, even before tackling my student loans, was tackle credit card debt. Most credit cards charge a hefty interest fee. The longer you have credit card debt, the more money you lose. I would also try to pay down any debt you have for your car. Those two are great places to start.
If you have trouble paying off your credit card debts, you can always try The Credit Pros. They will help identify the most damaging and most helpful credit items, as well as provide advice and educational tools.
Continue making student loan minimum payments, if you can. I don’t like all this forbearance talk. I didn’t even like the student loan forgiveness program. I think that giving yourself lee-way with paying back debt when you have the ability to pay it makes your financial muscles weak. Even if you want to save money during this unprecedented time for “what-ifs”, I would recommend at least paying the minimum payment. Think of it as a finance work-out routine. It keeps you strong and on top of your game.
Grow your emergency fund. After making minimum payments, feel free to put your extra money in an emergency fund, for now. You want to prioritize emergency savings during this time over aggressive loan payments. With federal loans at 0% interest rates, federal student loans have stopped growing, which gives your money the opportunity to grow. Keep savings in a HYSA like Marcus. My affiliate link will give you an additional 0.20% APY for the first three months. While we wait for student loan repayment to resume, we can increase the amount to put towards it by letting our money grow on the side.
Start saving for retirement. 2020 gave us the breathing room to finally max out our 401-Ks for the first time! Each individual can contribute $19,500 towards their 401-Ks and if you are fortunate, your company will match a portion of that. Additionally, if you have the room, I would also recommend maxing out a ROTH-IRA and contribute to an HSA. These are our personal preferences, but whatever retirement account you have access to or choose to invest in, look at this time as a blessing for retirement planning. We have never had this opportunity to max out our retirement funds, but it’s a habit we will likely hold on to for the future years to come.
Do not refinance. If you have a federal loan, take advantage of the 0% interest rate that it offers. You can invest in stocks, maximize retirement accounts or simply let it grow in a HYSA. Refinancing will increase your interest rate and preclude you from taking advantage of forbearance, which would be useful in times of dire emergency, such as getting ill, let’s say.
Consult with a professional. If all of this seems too much or you feel that the advice does not apply to your particular student loan situation, I would highly recommend talking to a professional. Travis Hornsby at Student Loan Planner has saved us thousands of dollars. Their consultations are well worth the price and you will get more in return than what the consultation costs, which in my opinion is a win! I recommend only Travis and his team, because he knows more than anyone else about this stuff. Schedule your call here and let him know I sent ya using this affiliate link. (For those looking for an alternative option, there’s also Andrew Paulson, from Student Loan Advice backed by White Coat Investor. I haven’t yet tried his services but I am always trying to keep an eye out for good alternatives!)
Lastly, when all seems lost, know that I am in your corner. You can always reach out to me, too.
Photo by Adeolu Eletu on Unsplash
